SON » Topics » F-24

These excerpts taken from the SON 10-K filed Feb 28, 2008.

F-24


Table of Contents

 

other respondents to jointly take various actions to clean up Operating Units 2 – 5. The order establishes two phases of work. The first phase consists of planning and design work as well as preparation for dredging and other remediation work and must be completed by December 31, 2008. The second phase consists primarily of dredging and disposing of contaminated sediments and capping of the dredged and less contaminated areas of the river bottom. The second phase is required to begin in 2009 when weather conditions permit and is expected to continue for several years. The order also provides for a $32.5 per day penalty for failure by a respondent to comply with its terms as well as exposing a non-complying respondent to potential treble damages. Although U.S. Mills has reserved its rights to contest liability for any portion of the work, it is cooperating with the other respondents to comply with the first phase of the order.

The mediation proceedings caused U.S. Mills to revise its estimate of the range of loss probable to be incurred in connection with the remediation of Operating Units 2 – 5. Based on information currently available, there is no amount within the range that appears to be a better estimate than any other. Accordingly, pursuant to applicable accounting rules, U.S. Mills recorded a charge of $20,000 in the second quarter of 2007 for the remediation of Operating Units 2 – 5. The second quarter charge represents the minimum estimated amount of potential loss U.S. Mills believes it is likely to incur. Developments since the second quarter, including the ongoing mediation and issuance of the Administrative Order, have not yet provided U.S. Mills with a reasonable basis for further revising its estimate of the range of possible loss. U.S. Mills’ ultimate share of the liability, and any claims against the Company, could conceivably exceed the net worth of U.S. Mills. The Company does not believe it is probable that the effect of U.S. Mills’ Fox River liabilities would result in a pre-tax loss that would materially exceed the net worth of U.S. Mills, which was approximately $80,000 at December 31, 2007.

The Company has been named as a potentially responsible party at several other environmentally contaminated sites. All of the sites are also the responsibility of other parties. The potential remediation liabilities are shared with such other parties, and, in most cases, the Company’s share, if any, cannot be reasonably estimated at the current time.

As of December 31, 2007 and 2006, the Company (and its subsidiaries) had accrued $31,058 and $15,316, respectively, related to environmental contingencies. Of these, a total of $28,996 and $11,661 relate to U.S. Mills at December 31, 2007 and 2006, respectively. These accruals are included in “Accrued expenses and other” on the Company’s Consolidated Balance Sheets. U.S. Mills has insurance pursuant to which it may recover some or all of the costs it ultimately incurs, or it may be able to recoup some or all of such costs from third parties. There can be no assurance that such claims for recovery would be successful and no amounts have been recognized in the consolidated financial statements of the Company for such potential recovery or recoupment.

 

F-24







Table of Contents


 


other respondents to jointly take various actions to clean up Operating Units 2 – 5. The order establishes two phases of work. The first phase consists
of planning and design work as well as preparation for dredging and other remediation work and must be completed by December 31, 2008. The second phase consists primarily of dredging and disposing of contaminated sediments and capping of the
dredged and less contaminated areas of the river bottom. The second phase is required to begin in 2009 when weather conditions permit and is expected to continue for several years. The order also provides for a $32.5 per day penalty for failure by a
respondent to comply with its terms as well as exposing a non-complying respondent to potential treble damages. Although U.S. Mills has reserved its rights to contest liability for any portion of the work, it is cooperating with the other
respondents to comply with the first phase of the order.

The mediation proceedings caused U.S. Mills to revise its estimate of the range of
loss probable to be incurred in connection with the remediation of Operating Units 2 – 5. Based on information currently available, there is no amount within the range that appears to be a better estimate than any other. Accordingly,
pursuant to applicable accounting rules, U.S. Mills recorded a charge of $20,000 in the second quarter of 2007 for the remediation of Operating Units 2 – 5. The second quarter charge represents the minimum estimated amount of potential loss
U.S. Mills believes it is likely to incur. Developments since the second quarter, including the ongoing mediation and issuance of the Administrative Order, have not yet provided U.S. Mills with a reasonable basis for further revising its estimate of
the range of possible loss. U.S. Mills’ ultimate share of the liability, and any claims against the Company, could conceivably exceed the net worth of U.S. Mills. The Company does not believe it is probable that the effect of U.S. Mills’
Fox River liabilities would result in a pre-tax loss that would materially exceed the net worth of U.S. Mills, which was approximately $80,000 at December 31, 2007.

FACE="Times New Roman" SIZE="2">The Company has been named as a potentially responsible party at several other environmentally contaminated sites. All of the sites are also the responsibility of other parties. The potential remediation liabilities
are shared with such other parties, and, in most cases, the Company’s share, if any, cannot be reasonably estimated at the current time.

SIZE="2">As of December 31, 2007 and 2006, the Company (and its subsidiaries) had accrued $31,058 and $15,316, respectively, related to environmental contingencies. Of these, a total of $28,996 and $11,661 relate to U.S. Mills at
December 31, 2007 and 2006, respectively. These accruals are included in “Accrued expenses and other” on the Company’s Consolidated Balance Sheets. U.S. Mills has insurance pursuant to which it may recover some or all of the
costs it ultimately incurs, or it may be able to recoup some or all of such costs from third parties. There can be no assurance that such claims for recovery would be successful and no amounts have been recognized in the consolidated financial
statements of the Company for such potential recovery or recoupment.

 

COLOR="#5b593d">COMMITMENTS

As of December 31, 2007, the Company had long-term obligations to purchase
electricity and steam, which it uses in its production processes. In addition, the Company had long-term purchase commitments for certain raw materials, principally steel. These purchase commitments require the Company to make total payments of
approximately $289,600, as follows: $23,700 in 2008; $23,700 in 2009; $23,700 in 2010, $20,400 in 2011 and a total of $198,100 from 2012 through 2027.

COLOR="#5b593d">14. Shareholders’ Equity and Earnings per Share

EXCERPTS ON THIS PAGE:

10-K (2 sections)
Feb 28, 2008
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