CONTINGENCIES AND COMMITTMENTS

3 Months Ended

Apr. 30, 2013

CONTINGENCIES AND COMMITTMENTS [Abstract]

CONTINGENCIES AND COMMITTMENTS

NOTE 10 – CONTINGENCIES AND COMMITTMENTS

Beginning in 2002, the Company began to be named in asbestos-related lawsuits filed against a large number of industrial companies including, in particular, those in the pump and fluid handling industries. In management's opinion, the complaints typically have been vague, general and speculative, alleging that the Company, along with the numerous other defendants, sold unidentified asbestos-containing products and engaged in other related actions which caused injuries (including death) and loss to the plaintiffs.  Counsel has advised that more recent cases typically allege more serious claims of mesothelioma.  The Company's insurers have hired attorneys who, together with the Company, are vigorously defending these cases.  Many cases have been dismissed after the plaintiff fails to produce evidence of exposure to the Company's products.  In those cases where evidence has been produced, the Company's experience has been that the exposure levels are low and the Company's position has been that its products were not a cause of death, injury or loss.  The Company has been dismissed from or settled a large number of these cases.  Cumulative settlement payments through April 30, 2013 for cases involving asbestos-related claims were $740,000, which together with all legal fees other than corporate counsel expenses, have been paid by the Company's insurers.  The average cost per settled claim, excluding legal fees, was approximately $25,000.

Based upon the most recent information available to the Company regarding such claims, there were a total of 164 cases pending against the Company as of April 30, 2013 (with Connecticut, New York, Pennsylvania and West Virginia having the largest number of cases), as compared with 157 cases that were pending as of January 31, 2013.  During the current fiscal year commencing February 1, 2013 through April 30, 2013, 18 new cases were filed against the Company, and the Company was dismissed from 11 cases and settled zero cases.  Most of the pending cases have not advanced beyond the early stages of discovery, although a number of cases are on schedules leading to, or are scheduled for trial. The Company believes that its insurance coverage is adequate for the cases currently pending against the Company and for the foreseeable future, assuming a continuation of the current volume, nature of cases and settlement amounts.  However, the Company has no control over the number and nature of cases that are filed against it, nor as to the financial health of its insurers or their position as to coverage.  The Company also presently believes that none of the pending cases will have a material adverse impact upon the Company's results of operations, liquidity or financial condition.

At any given time, the Company is typically also party to a small number of other legal proceedings arising in the ordinary course of business. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based upon the present information, including the Company's assessment of the facts of each particular claim as well as accruals, the Company believes that no pending proceeding will have a material adverse impact upon the Company's results of operations, liquidity, or financial condition.

As referenced in Note 12, upon closing the contemplated merger transactions with CECO Environmental Corp. ("CECO"), the Company is liable to pay a success fee to its investment banking firm in the amount of approximately $2.2 million, which is in addition to fees which were paid to or accrued for its investment banking firm in the three-months ended April 30, 2013.  Other merger related costs yet to be incurred, such as additional legal, accounting and certain investment banking fees, must be paid even if the merger is not completed.  Under certain circumstances specified in the Agreement and Plan of Merger, the Company may be required to pay CECO a termination fee of approximately $6.7 million.