Contingencies

6 Months Ended

Jun. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

The Company is a party to various legal proceedings, lawsuits and administrative actions, which are of an ordinary or routine nature for a company of its size and sector. The Company believes that such proceedings, lawsuits and administrative actions will not materially adversely affect its operations, financial condition, liquidity or competitive position. For further description of the Company’s contingencies, reference is made to Note 21, “Contingencies” in the notes to consolidated financial statements in the Company’s 2023 Annual Report.

Asbestos and Silica Related Litigation

Prior to the divestiture described below, “Accrued liabilities” and “Other liabilities” of the Condensed Consolidated Balance Sheets included a total litigation reserve of $126.9 million as of December 31, 2023 with regards to potential liability arising from the Company’s asbestos-related litigation. The Company had an insurance recovery receivable for probable asbestos related recoveries of $157.7 million as of December 31, 2023, which was included in “Other assets” in the Condensed Consolidated Balance Sheets.

On June 5, 2024, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Onyx TopCo LLC (the “Buyer”), a wholly owned subsidiary of Delticus Holdings LLC (“Delticus”), which is an entity owned by entities affiliated with Third Point LLC. Under the Purchase Agreement, the Company transferred 100% of the equity interests of three wholly-owned subsidiaries that hold asbestos liabilities and certain assets, including the related insurance assets, to the Buyer, effective as of June 10, 2024. In connection with the divestiture (the “Asbestos Portfolio Sale”), the divested entities were capitalized with a total of $188.5 million, including $143.5 million from insurance settlement proceeds, $35.0 million from affiliates of Delticus, and $10.0 million from Ingersoll Rand. As these subsidiaries were the obligors for the Company’s asbestos-related liabilities and policyholders of the related insurance assets, the rights and obligations related to these items transferred upon the sale. The divested subsidiaries have agreed to indemnify us and our affiliates for their asbestos-related liabilities, which encompassed all of our consolidated asbestos-related liabilities and contingent liabilities immediately prior to the sale. The Purchase Agreement contains customary representations and warranties with respect to the divested subsidiaries, the Company, and Delticus. Pursuant to the Purchase Agreement, the Company and Delticus will each indemnify the other for breaches of representation and warranties or breaches of covenants, subject to certain limitations as set forth in the agreement. In connection with the sale, the Company and its Board of Directors received a solvency opinion from an independent advisory firm that the divested entities were solvent and adequately capitalized immediately prior to, at the time of, and after giving effect to, the sale.

Following the completion of the transfer, the Company no longer has any obligation with respect to pending and future asbestos claims. As such, the divested entities have been deconsolidated from the financial results of the Company as we no longer maintain control of the entities. Therefore, all associated assets and liabilities are no longer reported on the Consolidated Balance Sheet. The transaction resulted in a pre-tax loss of $58.8 million, recorded to “Other operating expense, net.” Additionally, the Company recorded a tax benefit as a result of the reversal of previously recorded net deferred tax liabilities of $7.6 million, resulting in an after-tax loss of $51.2 million recorded in the second quarter of 2024.

The following table summarizes the impacts of the divestiture.


Assets divested:
Cash and cash equivalents	$	153.5
Insurance recovery receivable	13.9

Liabilities divested:
Asbestos indemnity liability - current	(12.3)
Asbestos indemnity liability - noncurrent	(111.4)

Loss on Asbestos Sale, before transaction costs	43.7
Transaction costs	15.1
Loss on Asbestos Sale	58.8
Income tax benefit	(7.6)
Loss on Asbestos Sale, net of tax	$	51.2

Environmental Matters

The Company has been identified as a potentially responsible party (“PRP”) with respect to several sites designated for cleanup under U.S. federal “Superfund” or similar state laws that impose liability for cleanup of certain waste sites and for related natural resource damages. The Company has undiscounted accrued liabilities of $18.2 million and $16.7 million as of June 30, 2024 and December 31, 2023, respectively, on its Condensed Consolidated Balance Sheets to the extent costs are known or can be reasonably estimated for its remaining financial obligations in relation to environmental matters and does not anticipate that any of these matters will result in material additional costs beyond amounts accrued. Based upon consideration of currently available information, the Company does not anticipate any material adverse effect on its results of operations, financial condition, liquidity or competitive position as a result of compliance with federal, state, local or foreign environmental laws or regulations, or cleanup costs relating to these matters.