Garlock Sealing Technologies LLC and Garrison Litigation Management Group, Ltd. (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Subsidiary Condensed Combined Statements of Comprehensive Income

Condensed combined financial information for GST is set forth below, presented on a historical cost basis.

GST

(Debtor-in-Possession)

Condensed Combined Statements of Comprehensive Income

Years Ended December 31, 2012, 2011 and 2010

(in millions)

	2012			2011			2010
Net sales	$	240.1		$	236.1		$	198.3
Cost of sales		145.3			144.7			122.5
Gross profit		94.8			91.4			75.8
Operating expenses:
Selling, general and administrative		45.1			45.4			44.6
Asbestos-related		(1.6	)		2.7			24.4
Other		1.7			0.8			0.1
		45.2			48.9			69.1
Operating income		49.6			42.5			6.7
Interest income, net		27.9			26.8			25.5
Income before reorganization expenses and income taxes		77.5			69.3			32.2
Reorganization expenses		(31.4	)		(17.0	)		(9.0	)
Income before income taxes		46.1			52.3			23.2
Income tax expense		(16.3	)		(19.6	)		(8.2	)
Net income	$	29.8		$	32.7		$	15.0
Comprehensive income	$	30.4		$	31.6		$	19.0

Schedule of Condensed Combined Statements of Cash Flows

GST

(Debtor-in-Possession)

Condensed Combined Statements of Cash Flows

Years Ended December 31, 2012, 2011 and 2010

(in millions)

	2012			2011			2010
Net cash flows from operating activities	$	31.9		$	44.2		$	66.0
Investing activities
Purchases of property, plant and equipment		(6.9	)		(3.3	)		(3.6	)
Net receipts from loans to affiliates		0.5			13.1			22.7
Purchase of held-to-maturity securities		(110.0	)		—			—
Receipts from (deposits into) restricted cash accounts		1.4			(6.5	)		—
Acquisitions, net of cash acquired		—			(7.5	)		—
Net cash provided by (used in) investing activities		(115.0	)		(4.2	)		19.1
Effect of exchange rate changes on cash and cash equivalents		0.4			(0.8	)		0.5
Net increase in cash and cash equivalents		(82.7	)		39.2			85.6
Cash and cash equivalents at beginning of year		126.3			87.1			1.5
Cash and cash equivalents at end of year	$	43.6		$	126.3		$	87.1

Schedule of Condensed Combined Balance Sheets

GST

(Debtor-in-Possession)

Condensed Combined Balance Sheets

As of December 31, 2012 and 2011

(in millions)

	2012		2011
Assets:
Current assets	$	168.2	$	237.0
U.S. Treasury securities		110.0		—
Asbestos insurance receivable		120.7		142.3
Deferred income taxes		124.8		131.0
Notes receivable from affiliate		237.4		227.2
Other assets		74.3		74.1
Total assets	$	835.4	$	811.6
Liabilities and Shareholder’s Equity:
Current liabilities	$	76.9	$	65.9
Other liabilities		10.8		27.6
Liabilities subject to compromise (A)		468.4		469.2
Total liabilities		556.1		562.7
Shareholder’s equity		279.3		248.9
Total liabilities and shareholder’s equity	$	835.4	$	811.6

(A) Liabilities subject to compromise include pre-petition unsecured claims which may be resolved at amounts different from those recorded in the condensed combined balance sheets. Liabilities subject to compromise consist principally of asbestos-related claims. GST has undertaken to project the number and ultimate cost of all present and future bodily injury claims expected to be asserted, based on actuarial principles, and to measure probable and estimable liabilities under generally accepted accounting principles. GST has accrued $466.8 million as of December 31, 2012. The estimate indicated for those asbestos-related claims reflects the point in a wide range of possible outcomes determined based on historical facts and circumstances prior to the Petition Date as our estimate of the cost to resolve asbestos-related personal injury cases and claims against GST as they would have been resolved in the state courts or by settlements over a ten-year period from April 1, 2010 through March 31, 2020. GST adjusts this estimate to reflect payments of previously accrued but unpaid legal fees and to reflect the results of appeals. Otherwise, GST does not expect to adjust the estimate unless developments in the Chapter 11 proceeding provide a reasonable basis for a revised estimate. GST intends to use the claims resolution process in Chapter 11 to determine the validity and ultimate amount of its aggregate liability for asbestos-related claims. Due to the uncertainties of asbestos-related litigation and the Chapter 11 process, GST’s ultimate liability could differ materially from the recorded liability. See Note 19, “Commitments and Contingencies – Asbestos.”