CONTINGENCIES AND OTHER ACCRUED LOSSES

9 Months Ended

Feb. 29, 2012

CONTINGENCIES AND OTHER ACCRUED LOSSES

NOTE 7 — CONTINGENCIES AND OTHER ACCRUED LOSSES

We provide, through our wholly-owned insurance subsidiaries, certain insurance coverage, primarily product liability coverage, to our other subsidiaries. Excess coverage is provided by third-party insurers. Our reserves provide for these potential losses as well as other uninsured claims.

We also offer warranty programs at several of our industrial businesses and have established a product warranty liability. We review this liability for adequacy on a quarterly basis and adjust it as necessary. The primary factors that could affect this liability may include changes in the historical system performance rate as well as the costs of replacement. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted, as required, to reflect actual experience. It is probable that we will incur future losses related to warranty claims we have received but that have not been fully investigated and losses related to claims not yet received. While our warranty liability represents our best estimate at February 29, 2012, we can provide no assurances that we will not experience material claims in the future or that we will not incur significant costs to resolve such claims beyond the amounts accrued or beyond what we may recover from our suppliers. Product warranty expense is recorded within selling, general and administrative expense.

The following table includes the changes in our accrued warranty balances:

	Quarter Ended February 29/28,						Nine Months Ended February 29/28,
	2012			2011			2012			2011
	(In thousands)
Beginning Balance	$	16,330		$	15,931		$	17,196		$	17,602
Deductions (1)		(4,497	)		(3,434	)		(13,402	)		(14,717	)
Provision charged to SG&A expense		3,295			4,440			11,334			14,052
Ending Balance	$	15,128		$	16,937		$	15,128		$	16,937

(1) Primarily claims paid during the period.

In addition, like other companies participating in similar lines of business, some of our subsidiaries are involved in several proceedings relating to environmental matters. It is our policy to accrue remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. These liabilities are undiscounted and are not material to our financial statements during any of the periods presented.