Contingent Liabilities

9 Months Ended

Feb. 28, 2014

Contingent Liabilities

NOTE E – Contingent Liabilities

On August 5, 2013, we tendered to our excess loss carrier, who accepted the tender, a wrongful death claim against the Company involving a MAPP gas cylinder. Pursuant to the tender and its acceptance, our overall exposure related to this matter is limited to $2,000,000. As a result, a pre-tax charge of $2,000,000 was recorded within SG&A expense during the nine months ended February 28, 2014.

We are defendants in certain legal actions. In the opinion of management, the outcome of these actions, which is not clearly determinable at the present time, would not significantly affect our consolidated financial position or future results of operations. We believe that environmental issues will not have a material effect on our capital expenditures, consolidated financial position or future results of operations.

Insurance Recoveries

On August 19, 2013, a fire occurred at our Pressure Cylinders facility in Kienberg, Austria, in the building that houses the massing process in the production of acetylene cylinders. The other portions of the Austrian facility were not damaged; however, the massing building sustained extensive damage and was rendered inoperable. We have incurred losses related to the destruction of assets caused by the fire. Additionally, we have incurred and will continue to incur incremental business interruption costs. The Company has business interruption and property damage insurance and, as a result, the fire did not have a material adverse impact on the Company’s financial results.

The Company has received proceeds of $2,900,000 for the property portion of the claim, representing advance payments for the replacement value of the damaged property and equipment. These proceeds were in excess of the $145,000 remaining book value of the assets, resulting in a gain of $2,755,000. This gain was recorded within miscellaneous income in our consolidated statement of earnings for the nine months ended February 28, 2014. We will continue to receive payments from the insurance company for the replacement value of the property and equipment throughout the rebuild process.

Total proceeds received related to the insurance claim since the date of loss were as follows:

(in thousands)
Property and equipment	$	2,900
Business interruption		1,628
Other expenses		673
Total insurance proceeds	$	5,201

The proceeds for business interruption relate to the loss of profits from the date of the fire through December 31, 2013, and have been recorded as a reduction of manufacturing expense. The proceeds for other expenses represent reimbursement for incremental expenses related to the fire and were recorded as an offset to manufacturing expense. Prior to quarter end, the Company received written confirmation of the amount of proceeds for estimated loss of profits from January 1, 2014 through February 28, 2014 from its insurer. Accordingly, the Company recognized an insurance recovery of $417,000 as a reduction of manufacturing expense.