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COMMITMENTS AND CONTINGENCIES
 3 Months Ended
Mar. 31, 2012
COMMITMENTS AND CONTINGENCIES  
COMMITMENTS AND CONTINGENCIES

 

 

NOTE 15 — COMMITMENTS AND CONTINGENCIES

 

Purchase Commitments

 

The Company completed construction of a wind tower manufacturing facility in Brandon, South Dakota, in the first quarter of 2010, but has not commenced production at this facility. During 2010 the Company concluded that it would be difficult or impossible to operate this facility in a profitable or cost-effective manner in light of the expected mid-term demand for wind towers. In connection with this determination, during the fourth quarter of 2010, the Company recorded an impairment charge of $13,326 to reduce the carrying value of the assets to fair value. The Company currently has purchase commitments totaling approximately $390 outstanding related to this facility.  In the third quarter of 2011, the Company initiated a process to sell the facility and reclassified the facility, and the related indebtedness, to Assets Held for Sale and Liabilities Held for Sale, respectively (see Note 17, “Restructuring” of these financial statements).

 

Environmental Compliance and Remediation Liabilities

 

The Company’s operations and products are subject to a variety of environmental laws and regulations in the jurisdictions in which the Company operates and sells products governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous materials, soil and groundwater contamination, employee health and safety, and product content, performance and packaging. Certain environmental laws can impose the entire cost or a portion of the cost of investigating and cleaning up a contaminated site, regardless of fault, upon any one or more of a number of parties, including the current or previous owners or operators of the site. These environmental laws can also impose liability on any person who arranges for the disposal or treatment of hazardous substances at a contaminated site. Third parties may also make claims against owners, operators and/or users of disposal sites for personal injuries and property damage associated with releases of hazardous substances from those sites.

 

Warranty Liability

 

The Company provides warranty terms that range from one to seven years for various products and services supplied by the Company. In certain contracts, the Company has recourse provisions for items that would enable recovery from third parties for amounts paid to customers under warranty provisions. As of March 31, 2012 and 2011, estimated product warranty liability was $924 and $919 respectively, and is recorded within accrued liabilities in the Company’s condensed consolidated balance sheets.

 

The changes in the carrying amount of the Company’s total product warranty liability for the three months ended March 31, 2012 and 2011 were as follows:

 

 

 

March 31,

 

March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Balance, beginning of period

 

$

983

 

$

1,071

 

Warranty expense

 

(9

)

47

 

Warranty claims

 

(50

)

(199

)

Balance, end of period

 

$

924

 

$

919

 

 

Allowance for Doubtful Accounts

 

Based upon past experience and judgment, the Company establishes an allowance for doubtful accounts with respect to accounts receivable. The Company’s standard allowance estimation methodology considers a number of factors that, based on its collections experience, the Company believes will have an impact on its credit risk and the realizability of its accounts receivable. These factors include individual customer circumstances, history with the Company and other relevant criteria.

 

The Company monitors its collections and write-off experience to assess whether or not adjustments to its allowance estimates are necessary. Changes in trends in any of the factors that the Company believes may impact the realizability of its accounts receivable, as noted above, or modifications to its credit standards, collection practices and other related policies may impact the Company’s allowance for doubtful accounts and its financial results. The activity in the accounts receivable allowance liability for the three months ended March 31, 2012 and 2011 consists of the following:

 

 

 

For the three months ended March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Balance at beginning of year

 

$

438

 

$

489

 

Bad debt expense

 

132

 

154

 

Write-offs

 

(31

)

—

 

 

 

 

 

 

 

Balance at end of period

 

$

539

 

$

643

 

 

Collateral

 

In select instances, the Company has pledged specific inventory and machinery and equipment assets to serve as collateral on related payable or financing obligations.

 

Liquidated Damages

 

In certain customer contracts, the Company has agreed to pay liquidated damages in the event of qualifying delivery or production delays. These damages are typically limited to a specific percentage of the value of the product in question.

 

Other

 

As of March 31, 2012, approximately 22% of the Company’s employees were covered by two collective bargaining agreements with local unions in Cicero, Illinois and Neville Island, Pennsylvania. The collective bargaining agreements with the Company’s Cicero and Neville Island unions are scheduled to remain in effect through February 2014 and October 2012, respectively. The Company considers its union and employee relations to be satisfactory.

 

The sale price of the Company’s Badger subsidiary to BTI Logistics is subject to final working capital adjustments, certain contingencies and indemnifications.

 

On July 20, 2011, the Company entered into a strategic financing agreement including the following third parties: AMCREF Fund VII, LLC (“AMCREF”), a registered community development entity and Capital One, National Association (“Capital One”). This agreement allows the Company to receive below market interest rate funds through the federal New Markets Tax Credit (“NMTC”) program, see Note 16, “New Markets Tax Credit Transaction” of these consolidated financial statements. Under the New Markets Tax Credit program, the gross loan and investment in the Company’s Abilene, Texas gearbox refurbishment facility (the “Gearbox Facility”) of $10,000 generates $3,900 in tax credits over a period of seven years, which the financing agreement makes available to Capital One. The Gearbox Facility must operate and be in compliance with the terms and conditions of the agreement during the seven year compliance period, or the Company may be liable for the recapture of $3,900 in tax credits to which Capital One is otherwise entitled. The Company does not anticipate any credit recaptures will be required in connection with this arrangement.