Contingencies

9 Months Ended

Oct. 01, 2023

Note 13. Contingencies

The Company is party to a number of lawsuits arising in the normal course of our business. The Company and certain of the Company’s subsidiaries are among numerous defendants in a number of cases seeking damages for alleged exposure to asbestos-contaminated talc products sold by the Company’s subsidiary Barretts Minerals Inc. (“BMI”). As of October 1, 2023, we had 562 open cases related to certain talc products previously sold by BMI, which is an increase in volume from previous years. The following table details case activity related to talc products previously sold by BMI:

	Three Months Ended				Nine Months Ended
(number of claims)	Oct. 1, 2023		Oct. 2, 2022		Oct. 1, 2023		Oct. 2, 2022

Claims pending, beginning of period		507		430		439		345
Claims filed		60		59		181		184
Claims dismissed, settled or otherwise resolved		5		21		58		61

Claims pending, end of period		562		468		562		468

These claims typically allege various theories of liability, including negligence, gross negligence and strict liability and seek compensatory and, in some cases, punitive damages, but most of these claims do not provide adequate information to assess their merits, the likelihood that the Company will be found liable, or the magnitude of such liability, if any. We are unable to state an amount or range of amounts claimed in any of these lawsuits because state court pleading practices do not require the plaintiff to identify the amount of the claimed damage. The Company’s position, as stated publicly, is that the talc products sold by BMI are safe and do not cause cancer.

The Company records accruals for loss contingencies associated with legal matters, including talc-related litigation, when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. The ability to make such estimates and judgments can be affected by various factors, including whether damages sought in the proceedings are unsubstantiated or indeterminate, the stage of the litigation, the factual and legal matters in dispute, the ability to achieve comprehensive settlements, the availability of co-defendants with substantial resources and assets participating in the litigation, and our evaluation of the unique attributes of each claim.

While costs relating to the talc-related cases have increased concurrently with the volume, the majority of these costs have historically been borne by Pfizer Inc. in connection with certain agreements entered into in connection with the Company’s initial public offering in 1992, and as long as the litigation is subject to the stay under the Chapter 11 Cases (discussed below), the Company will not be required to make any payments in respect thereof. The Company is entitled to indemnification, pursuant to agreement, for liabilities arising from sales prior to the initial public offering. The Company continues to receive information with respect to potential costs associated with the defense and/or settlement of talc-related cases not subject to indemnification from Pfizer Inc. Although the Company believes that the talc products are safe and that claims to the contrary are without merit, BMI opportunistically settled certain talc-related cases in 2022 and 2023. None of such settlements have been material to the Company. In the third quarter of 2023, the Company reviewed its estimates of the probability and amount of losses in connection with its current talc-related cases and recorded a charge of $12.9 million of litigation expenses incurred in connection with BMI's bankruptcy and by BMI to defend against and restore its reserve for claims associated with certain talc products.

On October 2, 2023 (the “Petition Date”), notwithstanding the Company’s confidence in the safety of BMI’s talc products, the Company’s subsidiaries, BMI and Barretts Ventures Texas LLC (together with BMI, “Barretts”), filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas (the “Chapter 11 Cases”) to address and comprehensively resolve BMI’s liabilities associated with talc. See Note 15. During the pendency of the Chapter 11 Cases, the Company anticipates that BMI will benefit from the operation of the automatic stay, which stays ongoing litigation in connection with talc-related claims against BMI. By agreement, the filing or continued prosecution of all talc-related claims against BMI’s non-debtor affiliates is temporarily stayed through November 14, 2023, the date on which a hearing is scheduled on whether to permanently enjoin the filing or further prosecution of any talc-related claims against BMI’s non-debtor affiliates during the pendency of the Chapter 11 Cases. Barretts has been deconsolidated from the Company’s financial statements since the Petition Date.

The broader litigation and regulatory environments for talc-related claims continue to evolve. Moreover, although the Chapter 11 Cases are progressing, it is not possible at this time to predict the form of any ultimate resolution or when an ultimate resolution might occur. Given the foregoing factors, it is reasonably possible that the Company will incur a loss for liabilities associated with future talc claims in excess of the amount currently recognized. This risk is based on the potential for new talc-related claims that could eventually be asserted together with their associated disposition cost and related legal costs, despite the automatic stay with respect to claims against BMI, taking into account the portion of such hypothetical claims that may be subject to indemnification by Pfizer Inc., as well as the inability to estimate the amount that may be necessary to fully and finally resolve all of BMI’s future talc-related claims in connection with a confirmed Chapter 11 plan of reorganization. Accordingly, the Company is currently unable to provide an estimate or range of the magnitude of any potential loss related to future talc claims.