NOTE 11—COMMITMENTS AND CONTINGENCIES

Litigation

The Company is a party to claims and litigation in the normal course of its operations. There have been no material developments in the nine months ended September 30, 2015 in the legal proceedings identified in Part I, Item 3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. In addition, there were no new material legal proceedings during the quarter ended September 30, 2015.

Product Performance

The Company provides a short-term warranty that it has manufactured its products to the Company’s specifications. On limited occasions, the Company incurs costs to service its products in connection with specific product performance matters that do not meet the Company’s specifications. Anticipated future costs are recorded as part of cost of sales and accrued liabilities for specific product performance matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

On isolated occasions, the Company has also offered limited short-term performance warranties relating to its encapsulants not causing module power loss. The Company performs long-term performance testing of its encapsulants during product development prior to launching new product introductions and in customer certification of its products prior to entering into mass production. The Company has operated its solar business since the 1970s and over 20 GW worth of solar modules utilizing its encapsulants have been installed in the field with no reported module power performance issues caused by the Company’s encapsulants and no related warranty claims to-date. Based on this fact pattern, the Company has not accrued any warranty liability associated for this potential liability as it is remote of occurrence. If the Company was to ever receive a warranty claim for such matter, the Company would assess the need for a warranty accrual at that time.

The Company has accrued for specific product performance matters incurred in 2015 and 2014 that are based on management’s best estimate of ultimate expenditures that it may incur for such items. The following table summarizes the Company’s product performance liability that is recorded in accrued liabilities in the condensed consolidated balance sheets:

	September 30, 2015			September 30, 2014
Balance as of beginning of year	$	189		$	4,141
Additions	156			535
Reversals	—			(4,089		)
Reductions	(326		)	(245		)
Foreign exchange impact	(5		)	(36		)

Balance as of end of period	$	14		$	306

During the second quarter of 2014, the Company reversed $4,089 of an accrual related to a quality claim by one of the Company’s customers in connection with a non-encapsulant product that the Company purchased from a vendor in 2005 and 2006 and resold. The reversal was recorded in other income, net in the consolidated statements of comprehensive loss for the nine months ended September 30, 2014. The Company stopped selling this product in 2006. The Company has concluded that the settlement of this contingency was no longer probable and was remote.

Environmental

During 2010, the Company performed a Phase II environmental site assessment at its 10 Water Street, Enfield, Connecticut location. During its investigation, the site was found to contain a presence of volatile organic compounds. The Company has been in contact with the Department of Environmental Protection and has engaged a licensed contractor to remediate this circumstance. Based on ASC 450-Contingencies, the Company has accrued the estimated cost to remediate. The following table summarizes the Company’s environmental liability that is recorded in accrued liabilities in the Condensed Consolidated Balance Sheets:

	September 30, 2015		September 30, 2014
Balance as of beginning of year	$	57	$	76
Additions	—		—
Reductions	—		(12		)

Balance as of end of period	$	57	$	64

Spanish Grants

The Company’s Spanish subsidiary had received financial grants for certain fixed assets that requires the Company’s Spanish subsidiary to maintain a specific level of employment and to continue to operate certain fixed assets. In the third quarter of 2013, the Company’s Spanish subsidiary repaid $1,558 of grants that were accrued in 2012 in conjunction with cost reduction measures that failed to comply with employment level requirements for certain grants. During the fourth quarter of 2014, $974 of grants were reversed to other income and SG&A, as the Company met all of the grant requirements. If the Company’s Spanish subsidiary fails to satisfy one or more grant requirements, such subsidiary will not qualify for future incentives and may be required to refund a portion of previously granted incentives. If the Company’s Spanish subsidiary fails to comply with its obligations under the grants, or the respective government agencies determine that the Company’s Spanish subsidiary has not complied with the requirements of all of its grants, the Company could be required to make additional potential repayments ranging from zero to $4,000. Any such additional potential repayment could have a material adverse effect on the Company’s results of operations, prospects, cash flows and financial condition.