Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments And Contingencies Disclosure [Text Block]

Note 26 – Commitments and Contingencies

In 1992, the Company identified certain soil and groundwater contamination at AC Products, Inc. (“ACP”), a wholly owned

subsidiary. In voluntary coordination with the Santa Ana California Regional Water Quality Board, ACP has been remediating the

contamination, the principal contaminant of which is perchloroethylene (“PERC”). In 2004, the Orange County Water District

(“OCWD”) filed a civil complaint against ACP and other parties seeking to recover compensatory and other damages related to the

investigation and remediation of the contamination in the groundwater. Pursuant to a settlement agreement with OCWD, ACP agreed,

among other things, to operate the two groundwater treatment systems to hydraulically contain groundwater contamination emanating

from ACP’s site until the concentrations of PERC released by ACP fell below the current Federal maximum contaminant level for

four consecutive quarterly sampling events. In 2014, ACP ceased operation at one of its two groundwater treatment systems, as it had

met the above condition for closure. In 2020, the Santa Ana Regional Water Quality Control Board asked that ACP conduct some

additional indoor and outdoor soil vapor testing on and near the ACP site to confirm that ACP continues to meet the applicable local

standards and ACP has begun the testing program. As of December 31, 2020, ACP believes it is close to meeting the conditions for

closure of the remaining groundwater treatment system but continues to operate this system while in discussions with the relevant

authorities.

As of December 31, 2020, the Company believes that the range of potential-known liabilities associated with the balance of ACP

water remediation program is approximately $

0.1

 million to $

1.0

 million. The low and high ends of the range are based on the length

of operation of the treatment system as determined by groundwater modeling. Costs of operation include the operation and

maintenance of the extraction well, groundwater monitoring and program management. 

An inactive subsidiary of the Company that was acquired in 1978 sold certain products containing asbestos, primarily on an

installed basis, and is among the defendants in numerous lawsuits alleging injury due to exposure to asbestos. The subsidiary

discontinued operations in 1991 and has no remaining assets other than proceeds received from insurance settlements. To date, the

overwhelming majority of these claims have been disposed of without payment and there have been no adverse judgments against the

subsidiary. Based on a continued analysis of the existing and anticipated future claims against this subsidiary, it is currently projected

that the subsidiary’s total liability over the next 50 years for these claims is approximately $

0.5

 million (excluding costs of defense). 

Although the Company has also been named as a defendant in certain of these cases, no claims have been actively pursued against the

Company, and the Company has not contributed to the defense or settlement of any of these cases pursued against the subsidiary. 

These cases were handled by the subsidiary’s primary and excess insurers who had agreed in 1997 to pay all defense costs and be

responsible for all damages assessed against the subsidiary arising out of existing and future asbestos claims up to the aggregate limits

of their policies. A significant portion of this primary insurance coverage was provided by an insurer that is insolvent, and the other

primary insurers asserted that the aggregate limits of their policies had been exhausted. The subsidiary challenged the applicability of

these limits to the claims being brought against the subsidiary. In response, two of the three carriers entered into separate settlement

and release agreements with the subsidiary in 2005 and 2007 for $

15.0

 million and $

20.0

 million, respectively. 

The proceeds of both settlements were restricted and could only be used to pay claims and costs of defense associated with the

subsidiary’s asbestos litigation. In 2007, the subsidiary and the remaining primary insurance carrier entered into a Claim Handling

and Funding Agreement, under which the carrier is paying

27

% of defense and indemnity costs incurred by or on behalf of the

subsidiary in connection with asbestos bodily injury claims. The agreement continues until terminated and can only be terminated by

either party by providing a minimum of two years prior written notice. As of December 31, 2020, no notice of termination has been

given under this agreement. 

At the end of the term of the agreement, the subsidiary may choose to again pursue its claim against this insurer regarding the

application of the policy limits. The Company believes that, if the coverage issues under the primary policies with the remaining

carrier are resolved adversely to the subsidiary and all settlement proceeds were used, the subsidiary may have limited additional

coverage from a state guarantee fund established following the insolvency of one of the subsidiary’s primary insurers. Nevertheless,

liabilities in respect of claims may exceed the assets and coverage available to the subsidiary.

If the subsidiary’s assets and insurance coverage were to be exhausted, claimants of the subsidiary may actively pursue claims

against the Company because of the parent-subsidiary relationship. The Company does not believe that such claims would have merit

or that the Company would be held to have liability for any unsatisfied obligations of the subsidiary as a result of such claims. After

evaluating the nature of the claims filed against the subsidiary and the small number of such claims that have resulted in any payment,

the potential availability of additional insurance coverage at the subsidiary level, the additional availability of the Company’s own

insurance and the Company’s strong defenses to claims that it should be held responsible for the subsidiary’s obligati ons because of

the parent-subsidiary relationship, the Company believes it is not probable that the Company will incur losses. The Company has

been successful to date having any claims naming it dismissed during initial proceedings. Since the Company may be in this stage of

litigation for some time, it is not possible to estimate additional losses or range of loss, if any. 

As a result of the closing of the Combination on August 1, 2019, the Company is party to environmental matters related to certain

Houghton domestic and foreign properties currently or previously owned, described below. These environmental matters primarily

require the Company to perform long-term monitoring as well as operating and maintenance at each of the applicable sites. The

Company continually evaluates its obligations related to such matters, and based on historical costs incurred and projected costs to be

incurred over the next 28 years, has estimated the present value range of costs for all of the Houghton environmental matters, on a

discounted basis, to be between approximately $

5.5

 million and $

6.5

 million as of December 31, 2020, for which $

6.0

 million is

accrued within other accrued liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheet as of

December 31, 2020. Comparatively, as of December 31, 2019, the Company had $

6.6

 million accrued for with respect to these

matters.

Houghton’s Sao Paulo, Brazil site was required under Brazilian environmental, health and safety regulations to perform an

environmental assessment as part of a permit renewal process. Initial investigations identified soil and ground water contamination in

select areas of the site. The site has conducted a multi-year soil and groundwater investigation and corresponding risk assessments

based on the result of the investigations. In 2017, the site had to submit a new 5-year permit renewal request and was asked to

complete additional investigations to further delineate the site based on review of the technical data by the local regulatory agency,

Companhia Ambiental do Estado de São Paulo (“CETESB”). Based on review of the updated investigation data, CETESB issued a

Technical Opinion regarding the investigation and remedial actions taken to date. The site developed an action plan and submitted it

to CETESB in 2018 based on CETESB requirements. The site intervention plan primarily requires the site, amongst other actions, to

conduct periodic monitoring for methane in soil vapors, source zone delineation, groundwater plume delineation, bedrock aquifer

assessment, update the human health risk assessment, develop a current site conceptual model and conduct a remedial feasibility study

and provide a revised intervention plan. 

In December 2019, the site submitted a report on the activities completed including the revised site conceptual model and results

of the remedial feasibility study and recommended remedial strategy for the site. Other Houghton environmental matters include

participation in certain payments in connection with four currently active environmental consent orders related to certain hazardous

waste cleanup activities under the U.S. Federal Superfund statute. Houghton has been designated a potentially responsible party

(“PRP”) by the Environmental Protection Agency along with other PRPs depending on the site, and has other obligations to perform

cleanup activities at certain other foreign subsidiaries. These environmental matters primarily require the Company to perform long-

term monitoring as well as operating and maintenance at each of the applicable sites. 

The Company believes, although there can be no assurance regarding the outcome of other unrelated environmental matters, that

it has made adequate accruals for costs associated with other environmental problems of which it is aware. Approximately $

0.1

million and $

0.2

 million were accrued as of December 31, 2020 and 2019, respectively, to provide for such anticipated future

environmental assessments and remediation costs.

During the fourth quarter of 2020, one of the Company’s subsidiaries received a notice of inspection from a taxing authority in a

country where certain of its subsidiaries operate which related to a non-income (indirect) tax that may be applicable to certain products

the subsidiary sells. To date, the Company has not received any assessment from the authority related to potential liabilities that may

be due from the Company’s subsidiary. Consequently, there is substantial uncertainty with respect to the Company’s ultimate liability

with respect to this indirect tax, as the application of this tax in its given market is ambiguous and interpreted differently among other

peer companies and taxing authorities. The Company, with assistance from independent experts, has performed an evaluation of the

applicability of this indirect tax to the Company’s subsidiaries in this country. Information available to the Company at this time is

only sufficient to establish a range of probable liability, and no amount within the range is considered a better estimate than another. 

Based on this evaluation, the Company recorded a liability of $

1.5

 million in other accrued liabilities, which reflects the low end of the

range of probable indirect tax owed, including interest and taking into account applicable statutes of limitations. Because these

amounts in part relate to a Houghton entity acquired in the Combination and for periods prior to the Combination, the Company has

submitted an indemnification claim with Houghton’s former owners related to this potential indirect tax liability. The Company

recorded a receivable in other assets for approximately $

1.1

 million, which reflects the amount of the $

1.5

 million recorded liability

for which the Company anticipates being indemnified. The impact of this indirect tax, net of the recorded indemnification asset, was

approximately $

0.4

 million and was recorded as a component of SG&A during the fourth quarter of 2020. As noted, the Company

believes there is substantial uncertainty with respect to its ultimate liability given the ambiguous application of this indirect tax. At

this time, the Company’s best estimate of a potential range for possible assessments, including additional amounts that may be

assessed under these indirect tax laws, would be approximately $

0.4

 million to $

34

 million, which is net of approximately $

9

 million

of estimated income tax deductions and approximately $

22

 million of applicable rights to indemnification from Houghton’s former

owners.

The Company is party to other litigation which management currently believes will not have a material adverse effect on the

Company’s results of operations, cash flows or financial condition. In addition, the Company has an immaterial amount of contractual

purchase obligations.