10. Commitments and Contingencies

Litigation

See Item 3. "Legal Proceedings" in the Annual Report on Form 10-K for the year ended December 31, 2011. On June 7, 2012, the United States Court of Appeals for the Ninth Circuit unanimously affirmed the decision of the United States District Court, Central District of California, which had granted Kinro's motion for summary judgment dismissing all claims against Kinro asserted by Plaintiffs. Consequently, the litigation was terminated.

In addition, in the normal course of business, the Company is subject to proceedings, lawsuits 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 that 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 September 30, 2012, would not be material to the Company's financial position or annual results of operations.

Contingent Consideration Related to Acquisitions

In connection with several 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 September 30, 2012, based on the present value of the expected future cash flows using a market participant's weighted average cost of capital of 14.9 percent.

The following table summarizes the contingent consideration liability as of September 30, 2012 (in thousands):


					Fair Value
		Estimated			of Estimated
		Remaining			Remaining
Acquisition		Payments			Payments
Schwintek products	$	11,616	^(a)	$	9,605
Level-Up^TMsix-point leveling system		3,135	^(b)		2,359
Other acquired products		806	^(c)		672
Total	$	15,557		$	12,636

(a) Contingent consideration for three of the four products expires in March 2014. Contingent consideration for the remaining product will cease five years after the product is first sold to customers. Two of the four products acquired have a combined remaining maximum contingent consideration of $9.7 million, of which the Company estimates $8.5 million will be paid. Other than expiration of the contingent consideration period, the remaining products have no maximum contingent consideration.

(b) Other than expiration of the contingent consideration period in February 2016, these products have no maximum contingent consideration.

(c) Contingent consideration expires at various dates through October 2025. Certain of these products have a combined remaining maximum of $3.4 million, while the remaining products have no maximum contingent consideration.

As required, the liability for this contingent consideration is measured 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.

In the first nine months of 2012 and 2011, the net impact of the quarterly fair value adjustments and accretion of the liability was an expense recorded in selling, general, and administrative expenses in the Condensed Consolidated Statements of Income of $1.3 million and $1.0 million, respectively.

The following table provides a reconciliation of the Company's contingent consideration liability for the nine months ended September 30, 2012 (in thousands):


Balance at December 31, 2011	$	14,561
Acquisitions		67
Payments		(3,253	)
Accretion		1,324
Fair value adjustments		(63	)
Balance at September 30, 2012		12,636
Less current portion in accrued expenses and other current liabilities		5,667
Total long-term portion in other long-term liabilities	$	6,969

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to product returns, accounts receivable, inventories, notes receivable, goodwill and other intangible assets, income taxes, warranty obligations, self-insurance obligations, lease terminations, asset retirement obligations, long-lived assets, post-retirement benefits, stock-based compensation, segment allocations, contingent consideration, environmental liabilities, contingencies and litigation. The Company bases its estimates on historical experience, other available information and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results and events could differ significantly from management estimates.