COMMITMENTS AND CONTINGENCIES

Contingent Consideration

In connection with several business acquisitions, if certain sales targets for the acquired products are achieved, the Company would pay additional cash consideration. The Company has recorded a liability for the fair value of this contingent consideration at June 30, 2015, based on the present value of the expected future cash flows using a market participant’s weighted average cost of capital of 15.0 percent.

As required, the liability for this contingent consideration is measured at fair value quarterly, considering actual sales of the acquired products, updated sales projections, and the updated market participant weighted average cost of capital. Depending upon the weighted average costs of capital and future sales of the products which are subject to contingent consideration, the Company could record adjustments in future periods.

The following table provides a reconciliation of the Company’s contingent consideration liability for the six months ended June 30:



(In thousands)	2015			2014
Balance at beginning of period	$	8,129		$	7,414
Acquisitions	1,093			1,455
Payments	(1,874		)	(3,513		)
Accretion ^(a)	559			533
Fair value adjustments^(a)	90			828
Balance at end of the period^(b)	7,997			6,717
Less current portion in accrued expenses and other current liabilities	(4,264		)	(1,964		)
Total long-term portion in other long-term liabilities	$	3,733		$	4,753


(a)	Recorded in selling, general and administrative expense in the Condensed Consolidated Statements of Income.

(b)

Amounts represent the fair value of estimated remaining payments. The total estimated remaining payments as of June 30, 2015 are $11.4 million. The liability for contingent consideration expires at various dates through September 2029. Certain of the contingent consideration arrangements are subject to a maximum payment amount, while the remaining arrangements have no maximum contingent consideration.

Furrion Distribution and Supply Agreement

In July 2015, the Company entered into a six year exclusive distribution and supply agreement with Furrion Limited (“Furrion”). This agreement provides the Company with the rights to distribute Furrion’s complete line of products to OEMs and aftermarket customers in the RV, specialty vehicle, utility trailer, horse trailer, marine, transit bus and school bus industries throughout the United States and Canada. Furrion currently supplies a premium line of LED televisions and sound systems, navigation systems, wireless backup cameras, solar prep units, power solutions and kitchen appliances, primarily to the RV industry. Furrion’s sales were approximately $35 million in 2014.

In connection with this agreement, the Company acquired Furrion’s current inventory, as well as Furrion’s deposits on inventory scheduled for delivery, for approximately $11 million. In addition, the Company entered into the following minimum purchase obligations (“MPOs”):



	July 2015 - June 2016	$ 60 million
	July 2016 - June 2017	$ 90 million
	July 2017 - June 2018	$127 million
	July 2018 - June 2019	$172 million

If the Company misses an MPO in any given year by more than ten percent, after taking into account excess purchases from the previous year, Furrion has the right to either terminate the distribution agreement with six months’ notice or remove exclusivity from the Company. If exclusivity is withdrawn, the Company at its election can terminate the distribution agreement with six months’ notice. Upon termination of the agreement, Furrion has agreed to purchase from the Company any non-obsolete stocks of Furrion products at the cost paid by the Company. After the first year, Furrion and the Company have agreed to review these MPOs on an annual basis and adjust the MPOs as necessary based upon the current economic and industry conditions, the development and customer acceptance of new Furrion products, competition and other factors which impact demand for Furrion products.

Product Recalls

From time to time, the Company cooperates with and assists its customers on their product recalls and inquiries, and occasionally receives inquiries directly from the National Highway Traffic Safety Administration (“NHTSA”) regarding reported incidents involving the Company’s products. In February 2015, NHTSA opened a Preliminary Evaluation as a result of four Vehicle Owner Questionnaires (VOQs) alleging failure of the Company’s electrically powered step (“Coach Step”), which was primarily supplied for motorhome RVs between model years 2008 and 2014. In March 2015, NHTSA sent a formal request for information, data and supporting documentation from the Company regarding the Coach Step, which the Company provided in April 2015. The Company is continuing to review and test, internally and through a third-party engineering firm, the design and operation of its Coach Step in an attempt to recreate the alleged failures, and will supply the additional data and information to NHTSA for their review. At the current stage of the evaluation, the Company cannot predict the outcome of the inquiry, nor can it predict the scope or determine an estimate, or range of estimates, of the potential costs of a recall, or whether such costs would be material to the Company’s financial position or annual results of operations, in the event a recall were to be voluntarily initiated by the Company or required by NHTSA.

Litigation

In the normal course of business, the Company is subject to proceedings, lawsuits, regulatory agency inquiries and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, it is management’s opinion after final disposition, including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the Company beyond that provided in the Condensed Consolidated Balance Sheet as of June 30, 2015, excluding the NHTSA inquiry previously noted, would not be material to the Company’s financial position or annual results of operations.