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CONTINGENCIES AND COMMITMENTS
12 Months Ended
Jul. 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
CONTINGENCIES AND COMMITMENTS
CONTINGENCIES AND COMMITMENTS
Environmental Matters:
The Company has environmental matters, discussed below, at the following three U.S. sites: Ann Arbor, Michigan; Pinellas Park, Florida and Glen Cove, New York.
The Company’s balance sheet at July 31, 2014 contains environmental liabilities of $19,452 which relate to the items discussed below. In the opinion of Company management, the Company is in substantial compliance with applicable environmental laws and regulatory orders and its accruals for environmental remediation are adequate at this time.
Ann Arbor, Michigan:
In February 1988, an action was filed in the Circuit Court for Washtenaw County, Michigan (the “Court”) by the State of Michigan (the “State”) against Gelman Sciences Inc. (“Gelman”), a subsidiary acquired by the Company in February 1997. The action sought to compel Gelman to investigate and remediate contamination near Gelman’s Ann Arbor facility and requested reimbursement of costs the State had expended in investigating the contamination, which the State alleged was caused by Gelman’s disposal of waste water from its manufacturing process. Pursuant to a consent judgment entered into by Gelman and the State in October 1992 (amended September 1996 and October 1999) (the “Consent Judgment”), which resolved that litigation, Gelman is remediating the contamination without admitting wrongdoing.
The Court approved an agreed upon third amendment to the Consent Judgment on March 8, 2011. The amendment consolidated and streamlined the cleanup objectives and requirements, which had previously been included in the Consent Judgment and the Court’s subsequent remediation orders. The State and the Company are in the process of implementing the cleanup program required by the amendment.
Since the Company’s acquisition of Gelman, the State asserted several monetary claims allegedly arising from its enforcement of the Consent Judgment. In July 2012, the Company reached a tentative settlement of all monetary claims, including the stipulated penalties for a cost of $500. The settlement also resolves similar future groundwater monitoring claims. The parties executed the Settlement Agreement as of June 25, 2014. The Settlement Agreement will become effective upon the Court’s entry of a stipulated order dismissing the previously pursued stipulated penalties.
In July 2011, a Demand Letter from a neighboring landowner was sent to Gelman seeking compensation for diminution in value of approximately 144/154 acres of land resulting from inability to develop the land allegedly due to groundwater contamination emanating from Gelman’s Wagner Road facility. The Company believes there are barriers to development that are independent of the contamination issue. It is likely that the statute of limitations has now been reached with regard to the property value diminution claims.
In June 2013, the same neighboring landowner served a “Notice of Intent” regarding the potential filing of a statutory claim commonly referred to as a “Citizen’s Suit”. The relief available under the referenced statutes is limited to injunctive relief. The Company believes that the State’s enforcement action and the court-approved cleanup program bar the threatened private Citizen’s Suit.
In October 2013, Gelman was forced to petition the Court for access to the neighboring landowner’s property in order to sample monitoring wells as required by the Consent Judgment with the State. The landowner filed a counterclaim, assessing the previously threatened Citizen’s Suit claims for injunctive relief, statutory claims for response costs and the previously identified common law claims for property value diminution. In addition to statute of limitations defenses described above, the Company believes that the newly asserted cost claims are barred by other statutory defenses.
Based on the known situation, Company management has concluded that the current remediation reserve of $9,029 at July 31, 2014 is appropriate.
Pinellas Park, Florida:
In 1995, as part of a facility closure, an environmental site assessment was conducted to evaluate potential soil and groundwater impacts from chemicals that may have been used at the Company’s Pinellas Park facility during its manufacturing and testing operations. Methyl Isobutyl Ketone (“MIBK”) concentrations in groundwater were found to be higher than regulatory levels. Soil excavation was conducted in 1998 and subsequent groundwater sampling showed MIBK concentrations below the regulatory limits.
In October 2000, environmental consultants for a prospective buyer of the property found groundwater contamination at the Company’s property. In October 2001, a Site Assessment Report conducted by the Company’s consultants, which detailed contamination concentrations and distributions, was submitted to the Florida Department of Environmental Protection (“FDEP”).
In July 2002, a Supplemental Contamination Assessment Plan and an Interim Remedial Action Plan (“IRAP”) were prepared by the Company’s consultants and submitted to the FDEP. A revised IRAP was submitted by the Company in December 2003, that was accepted by the FDEP in January 2004. A Remedial Action Plan (“RAP”) was submitted by the Company to the FDEP in June 2004. Final approval by the FDEP of the Company’s RAP was received by the Company on August 26, 2006. Pursuant to the approved RAP, the Company began active remediation on the property. Extensive on-site remediation was done to address source area concentrations and eliminate free-phase product, which is required by FDEP.
On March 31, 2006, the FDEP requested that the Company investigate potential off-site migration of contaminants. Off-site contamination was identified and the FDEP was notified. On April 13, 2007, the FDEP reclassified the previously approved RAP as an Interim Source Removal Plan (“ISRP”) because a RAP can only be submitted after all contamination is defined.
Pursuant to FDEP requirements, the Company installed additional on-site and off-site monitoring wells during fiscal years 2006 through 2009. Additional monitoring wells were installed in fiscal year 2010 and monitoring results provided to the FDEP. The Company completed and submitted a Site Assessment Report (“SAR”) Addendum, summarizing the soil and groundwater contamination, delineation and remediation; the FDEP approved the SAR Addendum in May 2012.
The Company submitted a RAP in October 2012 in accordance with a schedule approved by the FDEP. The RAP describes a remedy identified as Risk Management Option III (“RMO III”). The FDEP has agreed with the approach outlined in RMO III. Additional remediation at the site will be designed to satisfy the RMO III site closure requirements, which include (1) no free product contaminants, (2) shrinking or stable plumes, and (3) prevention of future exposure of the public or environment. The RMO III also requires land use restrictions for those properties where contaminate concentrations exceed default values. The Company has secured restrictive covenants for the three properties immediately down gradient and continues negotiation of additional restrictive covenants on other properties including County and City right-of-ways.
In the RAP, the Company proposed the use of groundwater extraction from several well locations. This effort was designed to stabilize the plume, a requirement of the RMO III closure process. Once the RMO III closure criteria are met and active remediation has stopped, groundwater sampling and analysis will continue for at least the legislative minimum of one year. After groundwater sampling is complete, a closure application will be submitted to FDEP. In September 2013, the Florida State Department of Environmental Protection approved the the RAP. As a result of this, the Company added $4,440 to its environmental reserves in the first quarter of fiscal year 2014. The Company is now in the process of implementing the RAP.
Glen Cove, New York:
A March 1994 report indicated groundwater contamination consisting of chlorinated solvents at a neighboring site to the Company’s Glen Cove facility, and later reports found groundwater contamination in both the shallow and intermediate zones at the facility. In 1999, the Company entered into an Order on Consent with the New York State Department of Environmental Conservation (“NYSDEC”), and completed a Phase II Remedial Investigation at the Glen Cove facility.
The NYSDEC designated two operable units (“OUs”) associated with the Glen Cove facility. In March 2004, the NYSDEC finalized the Record of Decision (“ROD”) for the shallow and intermediate groundwater zones, termed OU-1. The Company signed an Order on Consent for OU-1 effective July 5, 2004, which required the Company to prepare a Remedial Design/Remedial Action (“RD/RA”) Work Plan to address groundwater conditions at the Glen Cove facility.
The Company completed a pilot test involving the injection of a chemical oxidant into on-site groundwater and, on May 31, 2006, submitted a report to NYSDEC entitled “In-Situ Chemical Oxidation Phase II Pilot Test and Source Evaluation Report” (the “Report”). The Report contained data which demonstrated that (1) in general, the pilot test successfully reduced contaminant levels and (2) the hydraulic controls installed on the upgradient Photocircuits Corporation (“Photocircuits”) site are not effective and contaminated groundwater continues to migrate from that site. On July 31, 2006, the Company received comments from NYSDEC on the Report. On September 27, 2006, the Company submitted responses to the NYSDEC comments. On November 16, 2006, the Company met with the NYSDEC representatives to discuss the Report and the impact of the continued migration of contaminated groundwater from the upgradient Photocircuits site onto the Glen Cove facility. On January 26, 2007, the Company submitted a draft conceptual remedial design document for the Glen Cove facility to NYSDEC for its technical review.
The Company met with NYSDEC representatives on April 12, 2007 to discuss a possible settlement of liability for OU-1 and for the contamination in the deep groundwater zone, termed OU-2. NYSDEC would not agree to settle OU-2 because a remedial investigation had not been completed. After numerous settlement discussions, the Company and NYSDEC executed on September 23, 2009 a Consent Decree settling liability for OU-1. On October 23, 2009, the Consent Decree was entered by the clerk of the United States District Court for the Eastern District of New York and became effective. Pursuant to the Consent Decree, the Company paid $2,000 on November 19, 2009 (which was previously accrued) in exchange for a broad release of OU-1 claims and liability except for a limited reopener provision for unknown contaminants Claims and losses arising out of or in connection with OU-2 or any damages to the State’s natural resources are excluded from the settlement. The ROD for OU-2 was deferred by NYSDEC until additional data was available to delineate contamination and select an appropriate remedy. NYSDEC requested that the Company and Photocircuits enter into a joint Order on Consent for the remedial investigation for OU-2. Photocircuits was not willing to enter into an Order and the Company was informed by NYSDEC that it would undertake the OU-2 investigation at the Photocircuits property. Photocircuits filed for Chapter 11 bankruptcy in October 2005 and, in or about March 2006, the assets of Photocircuits’ Glen Cove facility were sold to American Pacific Financial Corporation (“AMPAC”). AMPAC operated the facility under the Photocircuits name, but closed it on or about April 15, 2007. A Final Decree and Order closing Photocircuits’ Chapter 11 bankruptcy case was entered by the U.S. Bankruptcy Court on September 16, 2009 and no distributions were made to general unsecured creditors, which included the Company.
In July 2007, NYSDEC commenced the OU-2 investigation at both the Photocircuits and Pall sites. The Company retained an engineering consultant to oversee NYSDEC’s OU-2 work. NYSDEC’s OU-2 investigation is completed. In March 2013, NYSDEC issued RODs setting forth the remedies it selected for OU-2 at both the Pall and the Photocircuits sites. NYSDEC proposes to construct a single remedial system at the Pall site to address impacts to OU-2 at both sites. The remedy consists of in-situ chemical oxidation, groundwater pumping and reinjection, monitoring, and operation and maintenance activities.
NYSDEC has incurred costs for the OU-2 investigation at the Pall site. The Company has met with NYSDEC representatives regarding possible settlement of any present and future claims that NYSDEC may have related to OU-2.
Effective August 14, 2010, the Company and the State entered into a Tolling Agreement pursuant to which the time between October 9, 2009, the date of the Consent Decree for OU-1 was filed, and January 31, 2012, or such date as the State files suit, will not be included when computing the statute of limitations applicable to the commencement of any action by the State in connection with claims and losses arising out of OU-2 or natural resource damages associated with OU-1 or OU-2. On January 30, 2012, January 23, 2013, and May 13, 2014, the Company and the State entered into other Tolling Agreements extending the statute of limitations exclusion period concerning OU-2 through May 31, 2015. In August 2014, the parties reached agreement on language in the Consent Decree related to OU-2 and are awaiting executive level approvals. The Company has agreed to pay $3,250 in order to resolve any present and future claims that NYSDEC may have related to OU-2, including the cost of any remedies selected by the State. This amount was accrued as of July 31, 2014.
In the opinion of Company management, the Company is in substantial compliance with applicable environmental laws and its accruals for environmental remediation are adequate at this time. Because regulatory standards under environmental laws are becoming increasingly stringent, there can be no assurance that future developments, additional information and experience gained will not cause the Company to incur material environmental liabilities or costs beyond those accrued in its consolidated financial statements.
Other Contingencies and Commitments:
The Company and its subsidiaries are subject to certain other legal actions that arise in the normal course of business. Other than those legal proceedings and claims discussed above, the Company did not have any current other legal proceedings and claims that would individually or in the aggregate have a reasonably possible materially adverse effect on its financial condition or operating results. As such, any reasonably possible loss or range of loss, other than those related to the legal proceedings discussed in this Note, is immaterial. However, the results of legal proceedings cannot be predicted with certainty. If the Company failed to prevail in several of these legal matters in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.

The Company warrants its products against defect in design, materials and workmanship over various time periods. Warranty costs are recorded based upon experience. The warranty accrual as of July 31, 2014 and July 31, 2013 is immaterial to the financial position of the Company as is the change in the accrual for fiscal year 2014 to the Company’s consolidated results of operations, cash flows and financial position.
As of July 31, 2014, the Company had surety bonds outstanding relating primarily to its long-term contracts with governmental agencies of approximately $159,970.
The Company and its subsidiaries lease office and warehouse space, automobiles, computers and office equipment. Rent expense from continuing operations for all operating leases amounted to approximately $34,705 in fiscal year 2014, $34,694 in fiscal year 2013 and $35,319 in fiscal year 2012. Future minimum rental commitments at July 31, 2014, for all non-cancelable operating leases with initial terms exceeding one year are $29,767 in 2015; $22,621 in 2016; $16,380 in 2017; $10,872 in 2018; $8,243 in 2019 and $15,185 thereafter.
The Company and its subsidiaries have various non-cancelable purchase commitments for goods or services with various vendors that have terms in excess of one year. Future purchase commitments at July 31, 2014, for the aforementioned purchase commitments are $42,303 in 2015; $7,370 in 2016; $5,234 in 2017, $5,175 in 2018, and $1,247 in 2019.