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Commitments And Contingencies
9 Months Ended
Dec. 31, 2011
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

16. Commitments and Contingencies

Contingencies

The Company is currently subject to legal proceedings and claims that have arisen in the ordinary course of business. While the Company is not presently able to determine the potential liability, if any, related to all such matters, the Company believes the matters it currently faces, individually or in the aggregate, could have a material adverse effect on its financial condition or operations or liquidity.

On December 5, 2008, the Board terminated the employment agreement of Marc S. Hermelin, the Chief Executive Officer of the Company at that time, "for cause" (as that term is defined in such employment agreement). Additionally, the Board removed Mr. M. Hermelin as Chairman of the Board and as the Chief Executive Officer, effective December 5, 2008. In accordance with the termination provisions of his employment agreement, the Company determined that Mr. M. Hermelin would not be entitled to any severance benefits. In addition, as a result of Mr. M. Hermelin's termination "for cause," the Company determined it was no longer obligated for the retirement benefits specified in the employment agreement. However, Mr. M. Hermelin informed the Company that he believed he effectively retired from his employment with the Company prior to the termination of his employment agreement on December 5, 2008 by the Board. If it is determined that Mr. M. Hermelin did effectively retire prior to December 5, 2008, the actuarially determined present value (as calculated in December 2008) of the retirement benefits due to him would total $36.9. On November 10, 2010, Mr. M. Hermelin voluntarily resigned as a member of the Board.

On March 22, 2011, Mr. M. Hermelin made a demand on the Company for indemnification with respect to his payment of $1.9 imposed by the United States District Court as a fine and forfeiture of pecuniary gain as part of the sentence resulting from his guilty plea entered by the Court on March 10, 2011. Mr. M. Hermelin pled guilty to two federal misdemeanor counts as a responsible corporate officer of the Company at the time when a misbranding of two morphine sulfate tablets occurred that contained more of the active ingredient than stated on the label. In addition, the Company has advanced, under the terms of the Indemnification Agreement, legal expenses amounting to approximately $6.2 to various law firms that represented Mr. M. Hermelin for legal matters including the FDA and SEC investigations, the Department of Justice inquiry, the Audit Committee investigation, HHS OIG exclusion, various class action lawsuits and the lawsuits between M. Hermelin and the Company related to advancement, indemnification and retirement benefits. Under the Company's Indemnification Agreement entered into with all directors, including Mr. M. Hermelin when he served as Chairman of the Board and Chief Executive Officer of the Company, as a condition for the advancement of expenses, each director is required to sign an undertaking to reimburse the Company for the advanced expenses in the event it is found that the director is not entitled to indemnification. The Company has also received invoices for $0.4 of additional legal fees covering the same or other matters for which Mr. M. Hermelin is demanding indemnification. The Company has not paid these invoices. Mr. M. Hermelin's demand for reimbursement of the $1.9 fine and forfeiture, the advancement of legal fees to represent him for various legal matters and whether only such advancement should be indemnified is being handled by a special committee of independent directors appointed by the Board of Directors of the Company. On October 11, 2011, the Company, at the direction of the Special Committee, filed a Petition for declaratory judgment in the Circuit Court of St. Louis County against Mr. M. Hermelin styled K-V Pharmaceutical Company v. Marc Hermelin seeking a declaration of rights of the parties with regard to Mr. M. Hermelin's employment and indemnification agreements with the Company. The Company alleges that Mr. M Hermelin is not entitled to payments under such agreements due to breaches of his fiduciary obligations to the Company and its Board. On October 14, 2011, Mr. M. Hermelin filed an action in the Court of Chancery in the State of Delaware styled Marc S. Hermelin v. K-V Pharmaceutical Company, seeking: advancement of expenses in connection with certain proceedings; mandatory and permissive indemnification of attorneys' fees and other expenses incurred as to other proceedings; and advancement of attorneys' fees that he has incurred and will incur in the St. Louis County and Delaware actions. Mr. M. Hermelin claims that he is entitled to such amounts under the Company's Bylaws, Delaware law and his indemnification agreement. On February 7, 2012 the Court of Chancery issued a Memorandum Opinion determining: (1) Mr. M. Hermelin is not entitled to advancement from the Company in connection with a matter related to the release of certain jail records; (2) Mr. M. Hermelin is not entitled to mandatory indemnification with respect to his payment of $1.9 fine and forfeiture resulting from his guilty plea; (3) Mr. M. Hermelin is not entitled to mandatory indemnification in the HHS OIG exclusion matter; (4) Mr. M. Hermelin is entitled to mandatory indemnification in the FDA consent decree matter; and (5) the scope of the relevant discovery for the Court's permissive indemnification determinations.

Litigation and Governmental Inquiries

Resolution of one or more of the matters described below could have a material adverse effect on the Company's results of operations, financial condition or liquidity. The Company intends to vigorously defend its interests in the matters described below.

Accrued litigation consists of settlement obligations as well as loss contingencies recognized by the Company because settlement was determined to be probable and the related payouts were reasonably estimable. While the outcome of the current claims cannot be predicted with certainty, the possible outcome of claims is reviewed at least quarterly and an adjustment to the Company's accrual is recorded as deemed appropriate based upon these reviews. Based upon current information available, the resolution of legal matters individually or in aggregate could have a material adverse effect on the Company's results of operations, financial condition or liquidity. The Company is unable to estimate the possible loss or range of losses above amounts already accrued at December 31, 2011.

The Company and/or ETHEX have been named as defendants in certain multi-defendant cases alleging that the defendants reported improper or fraudulent pharmaceutical pricing information, i.e., Average Wholesale Price, or AWP, and/or Wholesale Acquisition Cost, or WAC, information, which allegedly caused the governmental plaintiffs to incur excessive costs for pharmaceutical products under the Medicaid program. Cases of this type have been filed against the Company and/or ETHEX and other pharmaceutical manufacturer defendants by the States of Louisiana and Utah. On October 21, 2010, the Company received a subpoena from the Florida Office of Attorney General requesting information related to ETHEX's pricing and marketing activities. The Company complied with the State's request for documents and pricing information and reached a verbal agreement with the State to stay any further proceedings for up to two years.

 

On August 29, 2002, Constance Conrad ("Relator") filed a complaint in the United States District Court for the District of Massachusetts styled United States ex rel. Constance Conrad, et al. v. Abbott Laboratories, Inc., pursuant to the qui tam provisions of the False Claims Act, against multiple defendants, including the Company. Specifically, the Relator alleged that the Company failed to advise the CMS that certain products formerly marketed by ETHEX Corporation, including Nitroglycerin Extended Release Capsules and Hyoscyamine Sulfate Extended Release Capsules, did not qualify for coverage under federal healthcare programs. On December 6, 2011 the parties, including the Department of Justice, the United States Attorney's Office for the District of Massachusetts, the Office of Inspector General of the Department of Health and Human Services and the TRICARE Management Activity (collectively the "United States") entered into a Settlement Agreement to resolve this dispute. Pursuant to the Settlement Agreement, the Company agreed to pay a total sum of $17.0, plus interest, to the United States in installments over five years as follows:

 

Total Payment Amounts including interest

   Payment Year

$0.6

   2011

$0.4

   2012

$2.4

   2013

$3.4

   2014

$5.4

   2015

$6.7

   2016

The Company made the payments that were due for 2011. In addition, the Company agreed to pay certain attorneys' fees and costs to Relator's counsel. The Company did not admit any wrong doing in connection with the allegations raised in the complaint, and upon the initial payment, the United States and Relator shall: 1) dismiss with prejudice all claims relating to the alleged conduct with regard to Nitroglycerin Extended Release Capsules and Hyoscyamine Sulfate Extended Release Capsules; 2) dismiss all remaining claims asserted in the complaint with prejudice to the Relator; and 3) dismiss all remaining claims asserted in the complaint without prejudice to the United States.

The Settlement Agreement provides the United States with various remedies and potential penalties for any failure by the Company to abide by the payment terms contained therein, including the right of the United States to rescind its release, offset any monies owed to the Company by the United States, seek payment for the full amount of its claim against the Company, and exclude the Company from participating in any Federal healthcare program.

The Company, at the direction of a special committee of the Board of Directors that was in place prior to June 10, 2010, responded to requests for information from the Office of the United States Attorney for the Eastern District of Missouri and FDA representatives working with that office. In connection therewith, on February 25, 2010, the Board, at the recommendation of the special committee, approved entering into a plea agreement subject to court approval, with the Office of the United States Attorney for the Eastern District of Missouri and the Office of Consumer Litigation of the United States Department of Justice (referred to herein collectively as the "Department of Justice"). The plea agreement was executed by the parties and was entered by the U.S. District Court, Eastern District of Missouri, Eastern Division on March 2, 2010. Pursuant to the terms of the plea agreement, ETHEX pleaded guilty to two felony counts, each stemming from the failure to make and submit a field alert report to the FDA in September 2008 regarding the discovery of certain undistributed tablets that failed to meet product specifications. Sentencing pursuant to the plea agreement also took place on March 2, 2010.

Pursuant to the revised plea agreement, ETHEX agreed to pay criminal fine in the amount of $23.4 as follows:

 

Payment Amounts including interest

  

Payment Due Date

$2.3

   March 12, 2010

  1.0

   December 15, 2010

  1.0

   June 15, 2011

  1.0

   December 15, 2011

  2.0

   June 15, 2012

  4.0

   December 15, 2012

  5.0

   June 15, 2013

  7.1

   December 15, 2013

 

The Company has made all payments due to date under the plea agreement. In addition to the fine and restitution, ETHEX agreed not to contest an administrative forfeiture in the amount of $1.8, which was paid within 45 days after sentencing and satisfied any and all forfeiture obligations ETHEX may have as a result of the guilty plea. In total, ETHEX agreed to pay fines, restitution and forfeiture in the aggregate amount of $27.6.

In exchange for the voluntary guilty plea, the Department of Justice agreed that no further federal prosecution will be brought in the Eastern District of Missouri against ETHEX, the Company or the Company's wholly-owned subsidiary, Ther-Rx, regarding allegations of the misbranding and adulteration of any oversized tablets of drugs manufactured by the Company, and the failure to file required reports regarding these drugs and patients' use of these drugs with the FDA, during the period commencing on January 1, 2008 through December 31, 2008.

In connection with the guilty plea by ETHEX, ETHEX was expected to be excluded from participation in federal healthcare programs, including Medicare and Medicaid. In addition, as a result of the guilty plea by ETHEX, HHS OIG had discretionary authority to also exclude the Company from participation in federal healthcare programs. However, the Company is in receipt of correspondence from HHS OIG stating that, absent any transfer of assets or operations that would trigger successor liability, HHS OIG has no present intent to exercise its discretionary authority to exclude the Company as a result of the guilty plea by ETHEX.

In connection with the previously anticipated exclusion of ETHEX from participation in federal healthcare programs, the Company ceased operations of ETHEX on March 2, 2010. On November 15, 2010, the Company entered into the Divestiture Agreement with HHS OIG under which the Company agreed to sell the assets and operations of ETHEX to unrelated third parties prior to April 28, 2011 and to file articles of dissolution with respect to ETHEX under Missouri law by such date. Following such filing, ETHEX may not engage in any new business other than for winding up its operations and will engage in a process provided under Missouri law to identify and resolve its liabilities over at least a two year period. Under the terms of the agreement, HHS OIG agreed not to exclude ETHEX from federal healthcare programs until April 28, 2011 and, upon completion of the sale of the ETHEX assets and of the filing of the articles of dissolution of ETHEX, the agreement will terminate. Civil monetary penalties and exclusion of ETHEX could have occurred if the Company had failed to meet its April 28, 2011 deadline. The Company has also received a letter from HHS OIG advising it further that assuming that it has complied with all agreements deemed necessary by HHS OIG, ETHEX has filed its articles of dissolution, and ETHEX no longer has any ongoing assets or operations other than those required to conclude the winding up process under Missouri law, HHS OIG would not exclude ETHEX thereafter. The Company has notified all parties of its intent to dissolve ETHEX and notifications were sent out on January 28, 2011. ETHEX has sold its assets in accordance with the Divestiture Agreement. On May 20, 2011, we received a letter from HHS OIG stating that based upon its review of the information provided in our monthly reports, it appeared that the Company and ETHEX had satisfied our obligation under the Divestiture Agreement.

The Company currently does not anticipate that the voluntary guilty plea by ETHEX will have a material adverse effect on the Company's efforts to comply with the requirements pursuant to the consent decree and to resume shipments of its approved products manufactured by third parties.

On November 10, 2010, Marc S. Hermelin voluntarily resigned as a member of the Board. The Company had been advised that HHS OIG notified Mr. M. Hermelin that he would be excluded from participating in federal healthcare programs effective November 18, 2010. In an effort to avoid adverse consequences to the Company, including a potential discretionary exclusion of the Company, and to enable it to secure its expanded financial agreement with U.S. Healthcare, the Company, HHS OIG, Mr. M. Hermelin and his wife (solely with respect to her obligations thereunder, including as joint owner with Mr. M. Hermelin of certain shares of Company stock) entered into the Settlement Agreement under which Mr. M. Hermelin also resigned as trustee of all family trusts that hold KV stock, agreed to divest his personal ownership interests in the Company's Class A Common and Class B Common Stock (approximately 1.8 million shares, including shares held jointly with his wife) over an agreed upon period of time in accordance with a divestiture plan and schedule approved by HHS OIG, and agreed to refrain from voting stock under his personal control. In order to implement such agreement, Mr. M. Hermelin and his wife granted to an independent third party immediate irrevocable proxies and powers of attorney to divest their personal stock interests in the Company if Mr. M. Hermelin does not timely do so. The Settlement Agreement also required Mr. M. Hermelin to agree, for the duration of his exclusion, not to seek to influence or be involved with, in any manner, the governance, management, or operations of the Company. On March 14, 2011, Mr. M. Hermelin pleaded guilty to two federal misdemeanor counts pertaining to misbranding of two oversized morphine sulfate tablets, as a responsible corporate officer of the Company at the time that such tablets were introduced into interstate commerce. See discussion above for information regarding certain claims for indemnification by Mr. M. Hermelin.

As long as the parties comply with the Settlement Agreement, HHS OIG has agreed not to exercise its discretionary authority to exclude the Company from participation in federal health care programs, thereby allowing the Company and its subsidiaries (with the single exception of ETHEX, which has been dissolved pursuant to the Divestiture Agreement with HHS OIG) to continue to conduct business through all federal and state healthcare programs.

 

As a result of Mr. M. Hermelin's resignation and the two agreements with HHS OIG, the Company believes that it has resolved its remaining issues with respect to HHS OIG and is positioned to continue to participate in Federal health care programs now and in the future.

On December 2, 2008, plaintiff Joseph Mas filed a complaint against the Company, in the United States District Court for the Eastern District of Missouri, Mas v. KV Pharma. Co., et al. On January 9, 2009, plaintiff Herman Unvericht filed a complaint against the Company also in the Eastern District of Missouri, Unvericht v. KV Pharma. Co., et al. On January 21, 2009, plaintiff Norfolk County Retirement System filed a complaint against the Company, again in the Eastern District of Missouri, Norfolk County Retirement System v. KV Pharma. Co., et al. The operative complaints in these three cases purport to state claims arising under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on behalf of a putative class of stock purchasers. On April 15, 2009, the Honorable Carol E. Jackson consolidated the Unvericht and Norfolk County cases into the Mas case already before her. The amended complaint for the consolidated action, styled Public Pension Fund Group v. KV Pharma. Co., et al., was filed on May 22, 2009. Defendants, including the Company and certain of its directors and officers, moved to dismiss the amended complaint on July 27, 2009. The court granted the motion to dismiss the Company and all individual defendants in February 2010. On March 18, 2010, the plaintiffs filed a motion for relief from the order of dismissal and to amend their complaint, and also filed a notice of appeal. On October 20, 2010, the Court denied plaintiffs' motion for relief from the order of dismissal and to amend pleadings. On November 1, 2010, plaintiffs' filed a notice of appeal. On September 21, 2011, an appeal was argued before the Eighth Circuit Court of Appeals on the matter. The Company is currently awaiting the court's decision.

On October 19, 2011, plaintiff Frank Julianello filed a complaint against the Company, in the United States District Court for the Eastern District of Missouri, alleging violations of the anti-fraud provisions of the federal securities laws on behalf of all purchasers of the publicly traded securities of the Company between February 14, 2011 and April 4, 2011. The complaint alleges class members were damaged by paying artificially inflated stock prices due to the Company's purportedly misleading statements regarding Makena® related to access and exclusivity.

On October 31, 2011, plaintiff Ramakrishna Mukku filed a complaint against the Company, in the United States District Court for the Eastern District of Missouri, alleging violations of the anti-fraud provisions of the federal securities laws on behalf of all purchasers of the publicly traded securities of the Company between February 14, 2011 and April 4, 2011. The complaint alleges class members were damaged by paying artificially inflated stock prices due to the Company's purportedly misleading statements regarding Makena® related to access and exclusivity.

On November 2, 2011, plaintiff Hoichi Cheong filed a complaint against the Company, in the United States District Court for the Eastern District of Missouri, on behalf of purchasers of the securities of the Company, who purchased or otherwise acquired K-V securities between February 14, 2011 and April 4, 2011, seeking to pursue remedies under the Exchange Act. The complaint alleges class members were damaged by purchasing artificially inflated stock prices due to the Company's purportedly misleading statements regarding Makena® related to access and exclusivity.

On November 15, 2011, plaintiffs Phil and Martha Tompkins filed a verified shareholder derivative complaint in the United States District Court, Eastern District of Missouri, against the Company, its Board of Directors and certain officers alleging breach of fiduciary duties and other misconduct from February 14, 2011 to April 4, 2011. The complaint alleges a breach of fiduciary duties including by making, and allowing the making of, purportedly materially false and misleading statements to the investing public related to Makena® and its access and exclusivity.

On November 30, 2011, plaintiff Douglas Sims filed a verified shareholder derivative petition for breach of fiduciary duty, waste of corporate assets, and unjust enrichment in the Circuit Court of St. Louis County, Missouri, against the Company, its Board of Directors and certain officers alleging breach of fiduciary duties, which have caused and continue to cause substantial damage to the Company, including by making, and allowing the making of, purportedly materially false and misleading statements to the investing public related to Makena® and its access and exclusivity.

On August 11, 2011, the Company was served with two contract actions related to stock option grants to two former employees. These actions are styled Scott Macke v. K-V Pharmaceutical Company and Melissa Hughes v. K-V Pharmaceutical Company. The lawsuits allege breach of covenant of good faith and fair dealing, breach of contract, and fraud. Plaintiffs claim that they were injured by not being able to exercise their stock options within the 90 days after their termination from the Company because the Company had issued a trading blackout. The Company also received letters from two other former employees, who have not filed suit claiming similar injury. On October 14, 2011, the Hughes Complaint was dismissed without prejudice with leave to amend on or before October 28, 2011. A First Amended Complaint was filed in the Hughes case on October 28, 2011. The Company filed its Answer to the First Amended Complaint on November 30, 2011 and removed the case to federal court. The Company filed an answer to the Macke complaint in state court.

 

The Company and/or ETHEX are named defendants in at least 20 pending product liability or other lawsuits that relate to the voluntary product recalls initiated by the Company in late 2008 and early 2009. The plaintiffs in these lawsuits allege damages as a result of the ingestion of purportedly oversized tablets allegedly distributed in 2007 and 2008. The lawsuits are pending in federal and state courts in various jurisdictions. Four of the 20 pending lawsuits have settled but have not yet been dismissed. Of the remaining 16 pending lawsuits, two plaintiffs allege economic harm, 12 plaintiffs allege wrongful death, and the remaining lawsuits allege non-fatal physical injuries. Plaintiffs' allegations of liability are based on various theories of recovery, including, but not limited to strict liability, negligence, various breaches of warranty, misbranding, fraud and other common law and/or statutory claims. Plaintiffs seek substantial compensatory and punitive damages. Two of the lawsuits are putative class actions seeking economic damages with respect to recalled products, one of the lawsuits has four unrelated plaintiffs, and the remaining lawsuits are either individual lawsuits or have two plaintiffs. The Company possesses third party product liability insurance, which the Company believes is applicable to many of the pending lawsuits and claims.

One of these putative class actions, styled Polk v. KV Pharmaceutical Company, et al., seeks economic damages with respect to recalled metoprolol succinate product. During January 2011, the decision of the U.S. District Court dismissing the case in favor of the Company was reversed on appeal. The Company requested reconsideration by the appellate court, which was denied in March 2011, and the Company filed a motion for appellate review en banc, which was denied by the court on May 12, 2011. The case was returned to the district court for further proceedings. The district court granted the Company's second motion to dismiss on December 15, 2011. The other putative class action, styled Herndon v. KV Pharmaceutical Company, et al., is pending in state court in Missouri. Plaintiff's Motion for Class Certification was heard by the court on August 16, 2011. The court issued an order denying class certification on December 15, 2011. In addition to the 20 pending lawsuits, there is one pending pre-litigation claim, which involves a death, that may or may not eventually result in a lawsuit.

The Company and ETHEX were named as defendants in a complaint filed by CVS Pharmacy, Inc. ("CVS") in the United States District Court for the District of Rhode Island on or about February 26, 2010 and styled CVS Pharmacy, Inc. v. K-V Pharmaceutical Company and Ethex Corporation ("CVS Complaint"). The CVS Complaint alleged three claims: breach of contract, breach of implied covenant of good faith and fair dealing, and, in the alternative, promissory estoppels. CVS' claims were premised on the allegation that the Company and/or ETHEX failed to perform their alleged promises to either supply CVS with its requirements for certain generic drugs or reimburse CVS for any higher price it must pay to obtain the generic drugs. CVS sought damages of no less than $100.0, plus interest and costs. In March 2011, CVS and its parent CVS Caremark Corporation filed a similar complaint, seeking damages similar to those sought in the federal case and adding another breach of contract claim, in state court in Superior Court of Providence County, Rhode Island, against the Company, ETHEX and Nesher. On July 18, 2011, the parties reached a settlement in which the Company agreed to pay the aggregate amount of $9.4 to CVS as follows: (a) the Company shall forgive approximately $6.8 in past CVS purchases of Makena® and $0.3 in ETHEX credits; and (b) the Company has given CVS a credit amount of approximately $2.3 to be used for purchases of any Company product by December 15, 2011. The Company paid the remaining portion of the $2.3 credit to CVS in cash on December 15, 2011. On November 7, 2011, the case was dismissed with prejudice.

On October 13, 2009, the Company filed a Complaint in the United States District Court for the Eastern District of Missouri, Eastern Division, against J. Uriach & CIA S.A. ("Uriach") seeking damages for breach of contract and misappropriation of the Company's trade secrets and that Uriach be enjoined from further use of the Company's confidential information and trade secrets. On September 28, 2010, the Court issued a Memorandum and Order granting defendant's Motion to Dismiss for lack of personal jurisdiction of defendant, J. Uriach & CIA, S.A. The Company appealed the decision and on August 3, 2011, the Eighth Circuit Court of Appeals reversed the decision to dismiss the Company's Complaint for lack of personal jurisdiction and remanded the case back to District Court. A settlement has been reached in principle between the parties.

Ther-Rx Corporation has been named as a defendant in a False Claims Act Qui Tam action filed under seal on March 28, 2003. The complaint was unsealed in July 2011 and alleges violations of Federal and State False Claims Act involving the submission of false or fraudulent claims for Medicaid reimbursement on outpatient prescription drugs that the defendants have made or caused to be made since as early as January 1, 1991. The Company was voluntarily dismissed in the plaintiff's amended complaint filed on November 10, 2011.

On November 17, 2011, the Company filed a verified complaint for injunctive and declaratory relief in the Court of Chancery of the State of Delaware against FemmePharma seeking to prevent FemmePharma from petitioning the U.S. Patent and Trademark Office for reexamination of U.S. Patent No. 5,993,856 in violation of the exclusive license granted by FemmePharma to the Company. On November 29, 2011, the court granted the Company's petition for a temporary restraining order against FemmePharma. On January 12, 2012 the parties entered into a settlement agreement dismissing the suit.

On November 28, 2011, the Purchaser of PDI notified the Company that it was submitting a claim of at least $1.8 for indemnification pursuant to the Asset Purchase Agreement entered into between the parties. Due to this claim, the escrow agent is still maintaining $1.8 of the amount that PDI deposited at the time of closing under the escrow arrangement. The Purchaser alleges the Company breached representations and warranties made in the Asset Purchase Agreement resulting in losses to the Purchaser. The parties are currently in discussions regarding these claims.

 

From time to time, the Company is involved in various other legal proceedings in the ordinary course of its business. While it is not feasible to predict the ultimate outcome of such other proceedings, the Company believes the ultimate outcome of such other proceedings will not have a material adverse effect on its results of operations, financial condition or liquidity.

There are uncertainties and risks associated with all litigation and there can be no assurance the Company will prevail in any particular litigation. During the nine months ended December 31, 2011 and 2010, the Company recorded expense of $0.1 and $8.6, respectively, for litigation and governmental inquiries. At December 31, 2011 and March 31, 2011, the Company had accrued $45.0 and $48.9, respectively, for estimated costs for litigation and governmental inquiries.

The Company has entered into a supply agreement to purchase, through December 2015, approximately $7 of materials from one of its suppliers.