XML 82 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
Commitments and Contingencies
12 Months Ended
Feb. 28, 2013
Commitments and Contingencies

Note 3: Commitments and Contingencies

MSC is a party to various legal proceedings in connection with the remediation of certain environmental matters as detailed below. We record these environmental reserves based upon historical experience and the extent of relevant information available from various third parties. A number of assumptions are made including, without limitation, the estimated extent of the environmental damage to any particular site, the available methods of remedy, the contribution expected from various other potentially responsible parties (“PRP”) and the discretionary authority of federal and state regulatory authorities in bringing enforcement actions.

In 1984, MSC was named as a PRP under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) for the surface, soil and ground water contamination at a Superfund site in Gary, Indiana. The U.S. District Court for the Northern District of Indiana entered a Consent Decree between the government and certain PRPs (including MSC) on the scope of the remediation work at the site. We receive periodic updates on the projected costs of the remediation work from the environmental consultant employed by certain PRPs (including MSC) to manage the remediation project. Remediation work is ongoing and we maintain a letter of credit for approximately $1.0 million to secure our estimated share of these expenses. The estimate of our liability for this site was $0.8 million at February 28, 2013.

In 2003, MSC, along with many other companies, was named as a PRP by the United States Environmental Protection Agency (“USEPA”) under CERCLA at the Lake Calumet Cluster Site in Chicago, Illinois, for allegedly sending certain waste from its Elk Grove Village facility to the site. No lawsuits have been filed against any of the PRPs, but it is likely that the USEPA and the Illinois Environmental Protection Agency will seek reimbursement of their costs. In March 2010, the USEPA proposed the site for listing as a federal Superfund site, which has the potential to provide additional federal funds for the remediation. To date, we have not received any notice that this designation has occurred. The Company cannot determine what effect, if any, this change in designation will have on its liability. As of February 28, 2013, the USEPA was in final discussions with the principal PRPs to design and fund an investigation of the appropriate methods of remediation for the groundwater at the site. Once approved, the investigation is expected to take approximately two years. The estimate of the Company’s liability for this site was $0.3 million, including the pending groundwater investigation, at February 28, 2013.

In 1998, the California Environmental Protection Agency (“CEPA”) named MSC and many other entities as PRPs under CERCLA at the Chatham Brothers Barrelyard Site in Escondido, California (“Chatham Site”) for surface, soil and ground water contamination associated with former waste handling activities at the site. CEPA alleged that a predecessor to MSC arranged for the transportation and treatment of waste handled at the site. MSC and the other PRPs are obligated to perform and complete the environmental investigation and cleanup activities at the Chatham Site in accordance with a Remedial Action Plan approved in 1999. Two CEPA agencies (Department of Toxic Substances Control and San Diego Regional Water Quality Control Board are overseeing the long-term remediation required at the Chatham Site. The activities necessary to complete the groundwater remediation are expected to last well into the future. The estimate of the Company’s liability for this site was $0.1 million at February 28, 2013.

MSC’s environmental reserves were approximately $1.2 million as of both February 28, 2013 and February 29, 2012. The Company does not believe that the outcome of its environmental legal proceedings will have a material adverse effect on its results of operations, financial position or cash flows, given the reserves recorded as of February 28, 2013, and, where applicable, taking into account contributions from other PRPs. There are, however, a number of uncertainties including, without limitation, the cost of site cleanup, the discretionary authority of federal and state regulatory authorities in bringing enforcement actions and other factors that affect the Company’s range of exposures.

Other Matters

MSC is also a party to various legal actions and customer disputes arising in the ordinary course of its business. These legal actions and customer disputes cover a broad variety of claims spanning MSC’s entire business. The Company believes that the resolution of these legal actions and customer disputes will not, individually or in the aggregate, have a material adverse effect on its results of operations, financial position or cash flows.