NOTE 14. Contingencies and Legacy Environmental Commitments

Environmental Matters

The Company is involved in environmental proceedings and potential proceedings relating to soil and groundwater contamination and other environmental matters at several former facilities unrelated to its current operations. These facilities were part of businesses disposed of by TransTechnology Corporation, the Company’s former parent company. Environmental cleanup activities usually span many years, which make estimating liabilities a matter of judgment because of various factors, including changing remediation technologies, assessments of the extent of contamination, and continually evolving regulatory environmental standards. The Company considers these and other factors as well as studies and reports by external environmental consultants to estimate the amount and timing of any future costs that may be required for remediation actions. The Company follows ASC 450 in recording and disclosing environmental liabilities and records a liability for its best estimate of remediation costs. Because the Company believes it has a more-definitive best estimate of the environmental liability, the Company does not calculate a range in accordance with ASC 450.

At September 30, 2015 and March 31, 2015, the aggregate environmental liability was $9,086 and $9,255, respectively, included in other current liabilities and other long term liabilities on the condensed consolidated balance sheets, before a cost-sharing receivable of approximately $1,150 and $1,554 at September 30, 2015 and March 31, 2015, respectfully, that is included in other current assets and other long term assets, net of third-party fees. The Company’s environmental liability reserves are not reduced for any potential cost-sharing reimbursements.

In the first six months of fiscal 2016 and the first six months fiscal 2015, the Company spent $307 and $383, respectively, on environmental costs, and for the entire fiscal 2015 the Company spent $946. These costs are charged against the environmental liability reserve and do not impact net income. The Company performs quarterly reviews of its environmental sites and the related liabilities.

The Company continues to participate in environmental assessments and remediation work at six locations, including certain former facilities. Due to the nature of environmental remediation and monitoring work, such activities can extend for up to thirty years, depending upon the nature of the work, the substances involved, and the regulatory requirements associated with each site. The Company does not discount the recorded liabilities.

Although the Company takes great care in developing these risk assessments and future cost estimates, the actual amount of remediation costs may be different from those estimated as a result of a number of factors including but not limited to the following: changes to federal and state environmental regulations or laws; changes in local construction costs and the availability of personnel and materials; unforeseen remediation requirements that are not apparent until the work actually commences; and actual remediation expenses that differ from those estimated. The Company does not include any unasserted claims that it might have against others in determining its potential liability for such costs, and, except as noted with specific cost sharing arrangements, has no such arrangements, nor has it taken into consideration any future claims against insurance carriers that the Company may have in determining its environmental liabilities. In those situations where the Company is considered a de minimis participant in a remediation claim, the failure of the larger participants to meet their obligations could result in an increase in the Company’s liability at such a site.

There are other sites that the Company is monitoring or investigating for potential environmental liability. In some cases, although a loss may be probable, it is not possible at this time to reasonably estimate the amount of any obligation for remediation activities because of uncertainties assessing the extent of the contamination or the applicable regulatory standard.

In addition, and as disclosed below, the Company will, where supported by the evidence, pursue claims for contribution to site investigation and cleanup costs against other potentially responsible parties (PRPs).

Glen Head, New York

In the first quarter of fiscal 2003, the Company entered into a consent order for a former facility in Glen Head, New York, which is currently subject to a contract for sale, pursuant to which the Company developed a remediation plan for review and approval by the New York Department of Environmental Conservation (“NYDEC”). The Company was advised in fiscal 2010 that the NYDEC required additional offsite groundwater delineation studies. Based upon the characterization work performed to date and this latest request, the Company’s reserve is $3,157 for the Glen Head site at September 30, 2015. The amounts and timing of payments are subject to the approved remediation plan and additional discussions with NYDEC.

The property is classified as “held for sale” for $3,800 after allowing for certain costs. In July 2001, the Company entered into a sales contract for the Glen Head, New York property for $4,000.

The buyer has indicated that its intended plan is to build residential housing on this former industrial site and has been engaged in the lengthy process of securing the necessary governmental approvals. In March 2015, the Company and the buyer entered into an amendment to the sales contract. The amendment provides for a potential reduction in the purchase price of up to $1,000 if the final governmental approvals contain certain limitations on the buyer’s ability to implement its intended development plan. The parties are obligated to close under the sales contract upon receipt of the final governmental approvals, and the Company must provide the buyer with a funded remediation plan and environmental insurance at closing. However, the amendment further provides that if the governmental approvals are not secured by December 31, 2017, then at any time after that date either the Company or the buyer may elect to terminate the sales contract. If at any time after December 31, 2017, the Company terminates the sales contract for convenience, the Company must return to the buyer an additional liquidated amount of $750. Pursuant to the amendment to the sales contract the Company deposited into an escrow account $530, included in other long term assets on the condensed consolidated balance sheets, to secure the purchaser’s funding of certain estimated building demolition activities that will be conducted prior to the closing of the sale of the real estate. Additional amounts may be required to be deposited into escrow if the actual demolition costs exceed this estimate. The funds in escrow will be returned to the Company at the time of the sale, or if the if the sales contract is terminated the funds will be released to the buyer.

Saltzburg, Pennsylvania (“Federal Labs”)

The Company sold the business previously operated at the property owned in Saltzburg, Pennsylvania. The Company presented an environmental cleanup plan during the fourth quarter of fiscal 2000 for a portion of Federal Labs site pursuant to a consent order and agreement with the Pennsylvania Department of Environmental Protection (“PaDEP”) in fiscal 1999 (“1999 Consent Order”). PaDEP approved the plan during the third quarter of fiscal 2004 and the Company paid $200 for past costs, future oversight expenses, and in full settlement of claims made by PaDEP related to the environmental remediation of the site with an additional $200 paid subsequently.

The Company concluded a second consent order with PaDEP in the third quarter of fiscal 2001 for a second portion of the Federal Labs site (“2001 Consent Order”), and concluded a third Consent Order for the remainder of the Federal Labs site in the third quarter of fiscal 2003 (“2003 Consent Order”). The Company submitted an environmental cleanup plan for the portion of the Federal Labs site covered by the 2003 Consent Order during the second quarter of fiscal 2004.

In the second quarter of fiscal 2014, the Company and the PaDEP executed a first amendment to the 2003 Consent Order for additional remediation work within the site covered by the 2003 Consent Order. The Company submitted an environmental cleanup plan for this additional remediation work during the second quarter of fiscal 2014.

The Company is administering a settlement, concluded in the first quarter of fiscal 2000, under which the U.S. Government pays 50% of the ongoing direct and indirect environmental costs for the Federal Labs site subject to the 1999 Consent Order. The U.S. Government cost-sharing receivable is classified primarily as other assets on the condensed consolidated balance sheets.

The Company also concluded an agreement in the first quarter of fiscal 2006, under which the U.S. Government paid an amount equal to 45% of the estimated environmental response costs for the Federal Labs site subject to the 2001 Consent Order. On May 6, 2014, the Pennsylvania Department of Environmental Protection (“PADEP”) approved the final remedial action report for the site subject to the 2001 Consent Order and as a result of this approval the Company believes that no further on-site work is required. The remaining technical fees from the Company’s technical advisors are not expected to exceed $10. Accordingly, the Company reduced the environmental reserve by $412 in June 2014.

In March 2014, the Company reached an agreement in principle with the U.S. Government with respect to environmental response costs for the Fed Labs site subject to the 2003 Consent Order. Under this agreement, which was formally executed in the first quarter of fiscal 2015, the U.S. Government will pay an amount equal to approximately 26% of the environmental response costs incurred prior to December 31, 2012 and 33.5% of the ongoing environmental response costs incurred thereafter. The U.S. Government cost-sharing receivable, net of third-party fees is included in other current assets and other long term assets on the condensed consolidated balance sheets.

At September 30, 2015, the environmental liability reserve at Federal Labs was $4,029. The Company expects that remediation at this site, which is subject to the oversight of the Pennsylvania authorities, will not be completed for several years, and that monitoring costs, although expected to be incurred over twenty years, could extend for up to thirty years.

Placerita, California

The Company successfully implemented a soil and groundwater remediation project and provided final investigation and cleanup reports to the California Department of Toxic Substances Control (“DTSC”) at its formerly-owned property in Placerita, California. In July 2015, the DTSC issued a No Further Action Determination Letter to the Company stating that all appropriate response actions have been completed, that all acceptable engineering practices were implemented, and that no further removal and remedial action is necessary thus releasing the Company from further obligations associated with the known contamination at the property.

The Company has no other known environmental obligations with respect to the Placerita California site. The remaining technical fees from the Company’s technical advisors and oversight fees from the DTSC are not expected to exceed $14. Accordingly, we reduced the environmental reserve by $430 in the second quarter of fiscal 2016.

There are other properties that have a combined environmental liability of $1,900 at September 30, 2015. After further assessment of the estimated amount and timing of any future costs that may be required for remediation actions, we had a change in estimate for two pre-existing sites and in the second quarter of fiscal 2016 recorded an additional environmental reserve for $430.

The environmental activity is summarized as follows:

Balance at March 31, 2015	$	9,255
Environmental costs incurred		(307	)
Interest accretion		138
Reduction of environmental reserve-Placerita, California		(430)
Change in estimate for pre-existing sites		430
Balance at September 30, 2015	$	9,086

Litigation

Certain other claims, suits, and complaints arising in the ordinary course of business have been filed or are pending against us. We believe, after consultation with legal counsel handling these specific matters, all such matters are reserved for or adequately covered by insurance or, if not so covered, are without merit or are of such kind, or involve such amounts, as would not be expected to have a material effect on our financial position or results of operations if determined adversely against us.