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change as the market value of the assets and interest rates from the divestiture of Crucible and Central Moloney and expire
fluctuate, as employees’ benefits change based on either plan at various dates through 2010. There is no liability for these
amendments or additional credited service, and if contributions guarantees reflected in the Company’s Consolidated Balance
are made to the plans. In addition, in the event of a plan termina- Sheets. In the event that Crucible or Central Moloney does not
tion, the calculation of the actual termination liability would be fulfill its obligations under its debt and/or lease agreements, the
based on more conservative interest rate assumptions and the Company could be responsible for these obligations.
deficit would likely be higher than the amount reflected above.
Other Contingent Liability Matters
Coltec’s ownership of Crucible’s common stock might never The Company provides warranties on many of its products. The
exceed 50% and Coltec might never become part of a “con- specific terms and conditions of these warranties vary depend-
trolled group.” In addition, Crucible’s pension plans might never ing on the product and the market in which the product is sold.
be terminated and Coltec might never bear any liability for any The Company records a liability based upon estimates of the
unfunded termination liability. costs that may be incurred under its warranties after a review of
historical warranty experience and information about specific
In conjunction with the closure of a Crucible plant in the early warranty claims. Adjustments are made to the liability as claim
1980s, Coltec was required to fund two irrevocable trusts for data and historical experience warrant.
retiree medical benefits for union employees at the plant. The first
trust (the “Benefits Trust”) pays for these retiree medical benefits Changes in the carrying amount of the product warranty liability
on an ongoing basis. Coltec has no continuing connection to for the year ended December 31, 2003 are as follows:
the Benefits Trust, and thus the assets and liabilities of this trust
are not included in the Company’s Consolidated Balance Sheets. (in millions)
Under the terms of the trust agreement, the trustees retained an Balance as of December 31, 2002 $5.7
actuary to assess the adequacy of the assets in the Benefits Trust Warranties issued 1.2
in 1995, and another actuarial report will be required in 2005 and Settlements made (1.9)
2015. If, at either or both of the future valuation dates, it is deter- Balance as of December 31, 2003 $5.0
mined that the trust assets are not adequate to fund the payment
of the medical benefits, Coltec will be required to contribute addi- Asbestos
tional amounts. Based on preliminary information, an additional HISTORY. Certain of the Company’s subsidiaries, primarily Garlock
contribution in 2005 is not anticipated. In the event there are ever Sealing Technologies, LLC (“Garlock”) and The Anchor Packing
excess assets in the Benefits Trust, those excess assets will not Company (“Anchor”), are among a number of defendants (typi-
revert to Coltec. cally 15 to 40 and sometimes more than 100) in actions filed in
various states by plaintiffs alleging injury or death as a result of
Because of the possibility of future contributions to the Benefits exposure to asbestos fibers. Among the products at issue in
Trust, Coltec was required to establish a second trust (the these actions are industrial sealing products, predominantly gas-
“Back-Up Trust”) to cover potential shortfalls in the Benefits kets and packing products. The damages claimed vary from
Trust. The assets and liabilities of the Back-Up Trust are reflected action to action and in some cases plaintiffs seek both compen-
in the Company’s Consolidated Balance Sheets in other non- satory and punitive damages. To date, neither Garlock nor
current assets and in retained liabilities of previously owned Anchor has been required to pay any punitive damage awards,
businesses, respectively, and amounted to $27.0 million each at although there can be no assurance that they will not be
December 31, 2003. If the actuary determines that there are required to do so in the future. Liability for compensatory dam-
excess assets in the Back-Up Trust at the Benefits Trust valuation ages has historically been allocated among all responsible
dates, the excess assets will revert to Coltec based on a distri- defendants. Since the first asbestos-related lawsuits were filed
bution formula and will be recorded in income upon receipt. against Garlock in 1975, Garlock and Anchor have processed
more than 500,000 asbestos claims to conclusion (including
The Company also has ongoing obligations, which are included judgments, settlements and dismissals) and, together with their
in retained liabilities of previously owned businesses in the insurers, have paid more than $900 million in settlements and
Consolidated Balance Sheets, with regard to workers’ compen- judgments at a cost in fees and expenses of an additional
sation, retiree medical and other retiree benefit matters, in $300 million.
addition to those mentioned previously, that relate to the
Company’s period of ownership of this operation. CLAIMS MIX. Of those claims resolved, less than 3% have been
claims of plaintiffs alleging the disease mesothelioma, approxi-
Debt and Capital Lease Guarantees mately 6% have been claims of plaintiffs with lung or other
As of December 31, 2003, the Company had contingent liabili- cancers, and more than 90% have been claims of plaintiffs
ties for potential payments on guarantees of certain debt and alleging asbestosis, pleural plaques or other impairment of
lease obligations totaling $11.1 million. These guarantees arose the respiratory system. Because the more serious disease cases
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