In August 2011, a tornado struck the Company's salt mine and its salt mechanical evaporation plant, both located in Goderich, Ontario.  There was no damage to the underground operations at the mine.  However, some of the mine's surface structures and the evaporation plant incurred significant damage which temporarily ceased production at both facilities.  The Company resumed production and shipping activities, on a reduced basis, at the Goderich mine in early September 2011 and regained full hoisting capability in April 2012.  However, the mine still requires significant repairs and reconstruction to fully restore the damaged surface structures and operating assets. The evaporation plant resumed limited activities in late September 2011 and reached full capability by the end of the first quarter of 2012.

 

The Company received approximately $25.0 million of insurance advances in the first quarter of 2012.  The Company recorded approximately $1.7 million and $8.7 million of insurance advances as a reduction to salt product cost in the consolidated statements of operations for the three months and nine months ended September 30, 2012, respectively.  The Company also has recorded approximately $16.3 million as deferred revenue in 2012 in accrued expenses in the consolidated balance sheets and has presented this amount in its operating section of the consolidated statements of cash flows for the nine months ended September 30, 2012.  In total, the Company has received $50.0 million of insurance advances since the tornado occurred and recorded approximately $26.3 million of deferred revenue in accrued expenses in its consolidated balance sheets as of September 30, 2012. In addition, the Company has recorded approximately $23.2 million of total insurance advances received as a reduction to salt product costs in the consolidated statements of operations in 2011 and 2012 to offset recognized impairment charges and site clean-up and restoration costs.  The actual insurance recoveries related to the replacement cost of property, plant and equipment are expected to exceed the net book value of the damaged property, plant and equipment and the related impairment charges of $4.8 million which was recorded for the year ended December 31, 2011. However, U.S. GAAP limits the recognition of insurance recoveries in the consolidated financial statements to the amount of recognized losses, provided the Company believes the recoveries are probable. Any gains related to the replacement of property, plant and equipment from insurance recoveries will be recorded in product cost in the consolidated statements of operations when all contingencies relating to the insurance claim have been resolved.

 

The Company also expects to have a substantial business interruption claim to offset lost profits and to offset certain additional expenses incurred related to the ongoing operations.  Thus far, the Company has identified approximately $1 million and $18 million for the three and nine months ended September 30, 2012, respectively, of estimated losses that it believes qualify as recoverable business interruption losses for a total of approximately $34 million of identified estimated losses since the tornado occurred. The amount of actual business interruption recoveries may differ materially from the Company's current and future estimates.  The Company believes the impact of estimated lost sales, lost production and additional expenses that will be incurred related to the tornado will be substantially covered by the Company's insurance policies.  Any insurance recoveries related to business interruption will be recognized as a reduction to product cost in the consolidated statements of operations when the insurance claim has been settled.  The Company has not recognized any reduction to product cost from insurance recoveries related to estimated business interruption losses.