Commitments and Contingencies

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies:

Environmental

The following activity was recorded in environmental liabilities for the six months ended June 30, 2023 (in thousands):


Beginning balance at December 31, 2022	$	38,245
Expenditures	(1,769)

Accretion of discount	573
Additions and changes in estimates	1,869
Foreign currency translation adjustments and other	629
Ending balance at June 30, 2023	39,547
Less amounts reported in Accrued expenses	7,909
Amounts reported in Other noncurrent liabilities	$	31,638

Environmental remediation liabilities included discounted liabilities of $31.9 million and $30.1 million at June 30, 2023 and December 31, 2022, respectively, discounted at rates with a weighted-average of 3.6% and 3.4%, respectively, and with the undiscounted amount totaling $60.4 million and $57.5 million at June 30, 2023 and December 31, 2022, respectively. For certain locations where the Company is operating groundwater monitoring and/or remediation systems, prior owners or insurers have assumed all or most of the responsibility.

The amounts recorded represent our future remediation and other anticipated environmental liabilities. These liabilities typically arise during the normal course of our operational and environmental management activities or at the time of acquisition of the site, and are based on internal analysis as well as input from outside consultants. As evaluations proceed at each relevant site, changes in risk assessment practices, remediation techniques and regulatory requirements can occur, therefore such liability estimates may be adjusted accordingly. The timing and duration of remediation activities at these sites will be determined when evaluations are completed. Although it is difficult to quantify the potential financial impact of these remediation liabilities, management estimates (based on the latest available information) that there is a reasonable possibility

that future environmental remediation costs associated with our past operations could represent an additional $21 million before income taxes, in excess of amounts already recorded.

We believe that any sum we may be required to pay in connection with environmental remediation matters in excess of the amounts recorded would likely occur over a period of time and would likely not have a material adverse effect upon our results of operations, financial condition or cash flows on a consolidated annual basis although any such sum could have a material adverse impact on our results of operations, financial condition or cash flows in a particular quarterly reporting period.

Litigation

We are involved from time to time in legal proceedings of types regarded as common in our business, including administrative or judicial proceedings seeking remediation under environmental laws, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as CERCLA or Superfund, products liability, breach of contract liability and premises liability litigation. Where appropriate, we may establish financial reserves for such proceedings. We also maintain insurance to mitigate certain of such risks. Costs for legal services are generally expensed as incurred.

As first reported in 2018, following receipt of information regarding potential improper payments being made by third-party sales representatives of our Refining Solutions business, within what is now our Ketjen segment, we investigated and voluntarily self-reported potential violations of the U.S. Foreign Corrupt Practices Act to the DOJ and SEC, and also reported this conduct to the DPP. Since reporting these matters to the DOJ, SEC, and DPP, we have cooperated with these agencies in their investigations of this historical conduct. We have implemented appropriate remedial measures and strengthened our compliance program and related internal controls.

As previously disclosed, we have been engaged in discussions with respect to the foregoing matters, and we have now reached agreements in principle to resolve these matters with the DOJ and SEC. DPP has confirmed it will not pursue action in this matter. In connection with this anticipated resolution, which relates to conduct prior to 2018, we would enter into a Non-Prosecution Agreement with the DOJ and an administrative resolution with the SEC, and pay a total of approximately $218.5 million in aggregate fines, disgorgement, and prejudgment interest to the DOJ and SEC. The anticipated resolution does not include a compliance monitorship, and we would agree to certain ongoing compliance reporting obligations. As we have agreements in principle only, there can be no assurance that we will enter into definitive agreements with respect to such resolution or as to the potential timing, final terms, or collateral consequences of any such resolution.

Based on the agreements in principle, we have recorded a charge of $218.5 million in Selling, General and Administrative Expenses in our Consolidated Statement of Operations and accrued a corresponding liability on our Consolidated Balance Sheet during the second quarter of 2023. Amounts payable to authorities pursuant to any potential final resolution could differ from the amount recorded in our consolidated financial statements. Based on available information to date, we do not expect any such difference would be material to our consolidated financial position.

Indemnities

We are indemnified by third parties in connection with certain matters related to acquired and divested businesses. Although we believe that the financial condition of those parties who may have indemnification obligations to the Company is generally sound, in the event the Company seeks indemnity under any of these agreements or through other means, there can be no assurance that any party who may have obligations to indemnify us will adhere to their obligations and we may have to resort to legal action to enforce our rights under the indemnities.

The Company may be subject to indemnity claims relating to properties or businesses it divested, including properties or businesses of acquired businesses that were divested prior to the completion of the acquisition. In the opinion of management, and based upon information currently available, the ultimate resolution of any indemnification obligations owed to the Company or by the Company is not expected to have a material effect on the Company’s financial condition, results of operations or cash flows. The Company had approximately $29.6 million and $66.1 million at June 30, 2023 and December 31, 2022, respectively, recorded in Other noncurrent liabilities, primarily related to the indemnification of certain income and non-income tax liabilities associated with the Chemetall Surface Treatment entities sold in 2017.

Other

We have contracts with certain of our customers which serve as guarantees on product delivery and performance according to customer specifications that can cover both shipments on an individual basis, as well as blanket coverage of

multiple shipments under certain customer supply contracts. The financial coverage provided by these guarantees is typically based on a percentage of net sales value.