COMMITMENTS AND CONTINGENCIES

The Company provides accruals for all direct costs, including legal costs, associated with the estimated resolution of contingencies at the earliest date at which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated. Costs accrued are estimated based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and outcomes. Legal costs for other than probable contingencies are expensed when services are performed.

Lease Obligations

At December 31, 2012, the Company is obligated under operating lease agreements for the rental of certain real estate and machinery and equipment used in its operations. At December 31, 2012, future minimum rental obligations aggregated approximately $71.5 million and are payable as follows:



Year Ended December 31,	Future Minimum Rental Obligations
	(Dollar amounts in millions)
2013	$	20.9
2014	16.0
2015	10.9
2016	7.3
2017	5.3
Thereafter	11.1

Certain of these lease agreements provide for increased payments based on changes in the consumer price index. Under certain of these lease agreements, the Company or its subsidiaries are also obligated to pay insurance and taxes.

Rental expense charged to continuing operations in the accompanying consolidated statements of operations was approximately $34.3 million, $31.2 million and $32.2 million for 2012, 2011 and 2010, respectively.

Indemnifications

The Company has indemnified third parties for certain matters in a number of transactions involving dispositions of former subsidiaries. The Company has recorded liabilities in relation to these indemnifications of approximately $5.3 million and $5.5 million at December 31, 2012 and 2011, respectively, of which approximately $2.3 million are recorded in accrued expenses and approximately $3.0 million and $3.2 million, respectively, are recorded in other long-term liabilities in the accompanying consolidated balance sheets. At December 31, 2012 and 2011, the undiscounted future payments related to these indemnifications were estimated to be approximately $5.7 million and $6.0 million, respectively.

Product Warranty and Recall Reserves

The Company sells a number of products and offers a number of warranties including, in some instances, extended warranties for which the Company receives proceeds. The specific terms and conditions of these warranties vary depending on the product sold and the country in which the product is sold. The Company estimates the costs that may be incurred under its warranties, with the exception of extended warranties, and records a liability for such costs at the time of sale. Deferred revenue from extended warranties is recorded at estimated fair value and is amortized over the life of the warranty and periodically reviewed to ensure that the amount recorded is equal to or greater than estimated future costs. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims, cost per claim, and new product introductions. The Company periodically assesses the adequacy of its recorded warranty claims and adjusts the amounts as necessary.

Changes in the Company’s combined short-term and long-term warranty liabilities during 2012 and 2011 are as follows:



	December 31,
	2012			2011
	(Dollar amounts in millions)
Balance, beginning of period	$	56.3		$	55.9
Warranties provided during period	26.8			26.3
Settlements made during period	(27.2		)	(29.7		)
Changes in liability estimate, including expirations and acquisitions	(1.2		)	3.8
Balance, end of period	$	54.7		$	56.3

The Company has undertaken several voluntary product recalls and reworks over the past several years. Additional product recalls and reworks could result in material future costs. Many of the Company's products, especially certain models of bath fans, range hoods, and residential furnaces and air conditioners, have a large installed base, and any recalls or reworks related to such products could be particularly costly. The costs of product recalls or reworks are not generally covered by insurance. Recalls or reworks may adversely affect the Company's reputation as a manufacturer of high-quality, safe products and could have a material adverse effect on its financial condition, results of operations and cash flows.

Other Commitments and Contingencies

Two of the Company's subsidiaries in the TECH segment ship security products to 2GIG, for whom the Company has determined that cash basis accounting treatment was appropriate for 2010 to 2012 for revenue recognition and has deferred revenue recognition on approximately $6.3 million and $6.3 million of net sales at December 31, 2012 and 2011, respectively. Under the agreement with 2GIG, the Company recognized net sales of approximately $63.1 million and $98.1 million during the years ended December 31, 2012 and 2011, respectively. The Company has recorded the cost basis of related inventory shipped of approximately $5.1 million and $4.8 million at December 31, 2012 and 2011, respectively, in other current assets in the accompanying consolidated balance sheets. In addition, included in inventory is approximately $5.8 million and $3.5 million at December 31, 2012 and 2011, respectively, of inventory related to this customer.

As discussed previously in Note 2, "Acquisitions and Other Investments", on February 14, 2013 the Company announced that it had signed a definitive agreement to acquire this customer from APX Group, Inc. This transaction is expected to close during the first half of 2013.

The Company is subject to other contingencies, including legal proceedings and claims, arising out of its businesses that cover a wide range of matters including, among others, environmental matters, contract and employment claims, product liability, warranty, and modification and adjustment or replacement of component parts of units sold, which include product recalls. Product liability, environmental and other legal proceedings also include matters with respect to businesses previously owned. The Company has used various substances in its products and manufacturing operations which have been or may be deemed to be hazardous or dangerous, and the extent of its potential liability, if any, under environmental, product liability and workers' compensation statutes, rules, regulations and case law is unclear. Furthermore, due to the lack of adequate information and the potential impact of present regulations and any future regulations, there are certain circumstances in which the amount or range of possible losses cannot be reasonably estimated.

While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, warranty, product liability, environmental liabilities, and product recalls, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. It is possible, however, that results of operations for any particular future period could be materially affected by changes in the Company's assumptions or strategies related to these contingencies or changes that are not within the Company's control.