CONTINGENCIES AND COMMITMENTS

12 Months Ended

Dec. 31, 2012

Contingencies And Committment [Abstract]

CONTINGENCIES AND COMMITMENTS

21.CONTINGENCIES AND COMMITMENTS

Legal Proceedings

In July 2012, the Corporation reached a settlement in the amount of $5.2 million with a former executive with regards to a gender bias lawsuit filed in 2003.  The settlement was paid during the third quarter of 2012.   All payments to settle this lawsuit have been made and no further payments are required.

The Corporation has been named in a number of lawsuits that allege injury from exposure to asbestos. To date, the Corporation has not been found liable for or paid any material sum of money in settlement in any case. The Corporation believes its minimal use of asbestos in our past and current operations and the relatively non-friable condition of asbestos in our products makes it unlikely that it will face material liability in any asbestos litigation, whether individually or in the aggregate. The Corporation maintains insurance coverage for these potential liabilities and believes adequate coverage exists to cover any unanticipated asbestos liability.

The Corporation is party to a number of legal actions and claims, none of which individually or in the aggregate, in the opinion of management, are expected to have a material effect on the Corporation's results of operations or financial position.

Letters of Credit and Other Arrangements

The Corporation enters into standby letters of credit agreements and guarantees with financial institutions and customers primarily relating to guarantees of repayment on certain Industrial Revenue Bonds, future performance on certain contracts to provide products and services, and to secure advance payments the Corporation has received from certain international customers. At December 31, 2012 and2011, the Corporation had contingent liabilities on outstanding letters of credit of $51.8 million and $55.8million, respectively.

AP1000 Program

The Corporation's Electro-Mechanical Division is the reactor coolant pump (RCP) supplier for the Westinghouse AP1000 nuclear power plants under construction in China and the United States. The first two RCPs under the China AP1000 program shipped during the third quarter of 2012 and the following two RCPs shipped during the fourth quarter of 2012. These shipments were delayed whichcould subject the Corporation to liquidated damage penalties. However, the Corporation believes that all future delivery dates will be revised to mitigate any performance risk and that adequate legal defenses exist should a liquidated damages claim be alleged against the Corporation. Currently, there has not been any threat, allegation, or claim for liquidated damages. Based upon the information available, the Corporation does not believe that the ultimate outcome will result in a material impact to its results of operations, financial condition, or cash flows.

U.S. Government Defense Budget/Sequestration

In August 2011, the Budget Control Act (the Act) announced a reduction in the DoD top line budget by approximately $490 billion over 10 years starting in 2013. Furthermore, in June 2012, the Office of Management and Budget announced that the budget for Overseas Contingency Operations and any unobligated balances in prior year funds will also be included in aggregate reductions. In addition, further mandatory budget cuts (or sequestration) as outlined in the Act were to be implemented starting on January 2, 2013. However, on January 1, 2013, Congress elected to delay the impact of sequestration until at least March 1, 2013, and these cuts will automatically be implemented if an agreement has not been reached by March 27, 2013. Sequestration could lead to additional reductions of approximately $500 billion from the Pentagon's top line budget over the next decade, resulting in aggregate reductions of about $1 trillion over 10 years. The DoD has taken the position that such reductions would generate significant operational risks and may require the termination of certain, as yet undetermined, procurement programs. As a result, various proposals have surfaced ranging from $100-$500 billion in budget cuts to the 10-year DoD budget. Any reduction in levels of DoD spending, cancellations or delays impacting existing contracts or programs, including through sequestration, could have a material impact on the Corporation's results of operations, financial position and or cash flows.