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.

Indemnifications

The Company has indemnified third parties for certain matters in a number of transactions involving dispositions of former subsidiaries, including certain pension and environmental liabilities. The Company has recorded liabilities in relation to these indemnifications of approximately $5.2 million and $5.3 million at March 30, 2013 and December 31, 2012, respectively, of which approximately $2.3 million are recorded in accrued expenses and approximately $2.9 million and $3.0 million, respectively, are recorded in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets. At March 30, 2013 and December 31, 2012, the undiscounted future payments related to these indemnifications were estimated to be approximately $5.5 million and $5.7 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 the first quarter of 2013 and 2012 are as follows:



	For the first quarter of
	2013			2012
	(Dollar amounts in millions)
Balance, beginning of period	$	54.7		$	56.3
Warranties provided during period	4.8			4.4
Settlements made during period	(5.0		)	(7.2		)
Changes in liability estimate, including expirations and acquisitions	0.3			1.0
Balance, end of period	$	54.8		$	54.5

Other Commitments and Contingencies

During 2012, the Company's TECH segment shipped security products to 2GIG, for whom the Company had determined that cash basis accounting treatment was appropriate at that time for revenue recognition and had deferred revenue recognition on approximately $6.3 million of net sales at December 31, 2012. Under the agreement with 2GIG, the Company recognized net sales of approximately $7.3 million during the first quarter of 2012. At December 31, 2012, the Company had recorded the cost basis of related inventory shipped of approximately $5.1 million in other current assets. In addition, included in inventory is approximately $12.5 million and $5.8 million at March 30, 2013 and December 31, 2012, respectively, of inventory related to 2GIG. In the fourth quarter of 2012, after a competitive sales process, 2GIG and its affiliates, including Vivint Inc., were acquired by the Blackstone Group LP in a private transaction for approximately $2.0 billion. The Company believes that Blackstone's acquisition of 2GIG had a favorable impact on the financial viability and credit worthiness of 2GIG. Following the Blackstone acquisition, the Company entered into a new supply agreement with 2GIG near the end of the fourth quarter of 2012. In light of the new arrangement with 2GIG, combined with the favorable impact of the acquisition of 2GIG and Vivint by Blackstone, the Company concluded that all of the revenue recognition criteria had been met and began to record revenue on the accrual basis for recording new sales to 2GIG. During the first quarter of 2013, the Company recorded net sales of approximately $24.1 million, of which approximately $6.3 million related to the recognition of deferred revenue from December 31, 2012. As discussed previously in Note B, "Acquisitions", on April 1, 2013 the Company acquired all of the outstanding common stock of 2GIG.

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.