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Certain of our wholly-owned subsidiaries, principally Bondex
International, Inc. (collectively referred to as the subsidiaries),
are defendants in various asbestos-related bodily injury
lawsuits filed in various state courts with the vast majority
of current claims pending in five states – Illinois, Ohio,
Mississippi, Texas and Florida. These cases generally seek
unspecified damages for asbestos-related diseases based on
alleged exposures to asbestos-containing products previously
manufactured by our subsidiaries or others.
As of May 31, 2007, our subsidiaries had a total of 10,824
active asbestos cases compared to a total of 10,580 cases as of
May 31, 2006. For the quarter ended May 31, 2007, our
subsidiaries secured dismissals and/or settlements of 608 claims
and made total payments of $18.6 million, which included
defense costs paid during the current quarter of $7.4 million.
For the comparable period ended May 31, 2006, dismissals
and/or settlements covered 106 claims and total payments
were $12.9 million, which included defense costs paid during
the quarter of $7.1 million. For the year ended May 31, 2007,
our subsidiaries secured dismissals and/or settlements of 1,900
claims and made total payments of $67.0 million, which
included defense costs paid during the year of $27.7 million.
For the comparable period ended May 31, 2006, dismissals
and/or settlements covered 945 claims and total payments
were $59.9 million, which included defense costs paid during
the year of $24.0 million. Excluding defense costs, the average
costs to resolve a claim, including dismissed claims, were
$18,416 and $54,783 for each of the quarters ended May 31,
2007 and 2006, respectively; and $20,684 and $37,989 for each
of the years ended May 31, 2007 and 2006, respectively. The
amount and timing of dismissals and settlements can fluctuate
significantly from period to period resulting in volatility in the
average costs to resolve claims in any given quarter or year.
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In addition, in some jurisdictions, cases may involve more than
one individual claimant. As a result, settlement or dismissal
statistics on a per case basis are not necessarily reflective of
the payment amounts on a per claimant basis and the amounts
and rates can vary widely depending on a variety of factors
including the mix of malignancy and non-malignancy claims
and the amount of defense costs incurred during the period.
Estimating the future cost of asbestos related contingent
liabilities was and continues to be subject to many
uncertainties, including (i) the ultimate number of claims filed;
(ii) the cost of resolving both current known and future
unknown claims; (iii) the amount of insurance, if any, available
to cover such claims, including the outcome of coverage
litigation against the subsidiaries’ third-party insurers;
(iv) future earnings and cash flow of our subsidiaries; (v) the
impact of bankruptcies of other companies whose share of
liability may be imposed on our subsidiaries under certain state
liability laws; (vi) the unpredictable aspects of the litigation
process including a changing trial docket and the jurisdictions
in which trials are scheduled; (vii) the outcome of any such
trials including judgments or jury verdicts, as a result of our
more aggressive defense posture which includes taking
selective cases to verdict; (viii) the lack of specific information
in many cases concerning exposure to the subsidiaries’
products and the claimants’ diseases; (ix) potential changes in
applicable federal and/or state law; and (x) the potential
impact of various proposed structured settlement transactions
or subsidiary bankruptcies by other companies, some of which
are the subject of federal appellate court review, the outcome
of which could materially affect any future asbestos-related
liability estimates.
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