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Restructuring and Other Impairment Charges | 6 Months Ended
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Jun. 29, 2014
Restructuring and Other Impairment Charges | Note 4 — Restructuring and other impairment charges 2014 Manufacturing Footprint Realignment On April 28, 2014, the Board of Directors approved a restructuring plan (the “2014 Manufacturing Footprint Realignment Plan”) involving the consolidation of operations and a related reduction in workforce at certain of the Company’s facilities, and will include the relocation of manufacturing operations from certain higher-cost locations to existing lower-cost locations. These actions commenced in the second quarter ended June 29, 2014 and are expected to be substantially completed by the end of 2017. The Company estimates that it will incur aggregate pre-tax charges in connection with these restructuring activities of approximately $42 to $53 million, most of which are expected to be incurred prior to the end of 2016. In addition, the Company estimates that $32 million to $40 million of the aggregate pre-tax charges will result in future cash outlays, most of which are expected to be incurred prior to the end of 2016. The following table provides a summary of the Company’s current cost estimates by major type of cost associated with the 2014 Manufacturing Footprint Realignment Plan:
Type of cost | Total estimated amount expected to be incurred
Termination benefits | $12 million to $15 million
Facility closure and other exit costs(1) | $2 million to $5 million
Accelerated depreciation charges | $10 million to $12 million
Other (2) | $18 million to $21 million
| $42 million to $53 million
(1) | Includes costs to transfer product lines among facilities and outplacement and employee relocation costs.
(2) | Consists of other costs directly related to the Plan, including project management, legal and regulatory costs.
The Company recorded expenses of $9.5 million for the three and six month ended June 29, 2014 related to the 2014 Manufacturing Footprint Realignment Plan. Of this amount, $8.6 million related to termination benefits and was recorded as restructuring expense and $0.9 million related to accelerated depreciation and other costs and was recorded as cost of sales. As of June 29, 2014, the Company has a restructuring reserve of $8.6 million in connection with the 2014 Manufacturing Footprint Realignment Plan all of which relates to termination benefits. As the program progresses, management will reevaluate the estimated costs set forth above, and may revise its estimates and the accounting charges relating to these actions, as appropriate, consistent with generally accepted accounting principles. 2014 European Restructuring Plan On February 27, 2014, the Company committed to a restructuring plan (the “2014 European Restructuring Plan”), which impacts certain administrative functions in Europe and involves the consolidation of operations and a related reduction in workforce at certain of the Company’s European facilities. The Company estimates that it will record pre-tax charges of approximately $8 million to $9 million in connection with implementing the 2014 European Restructuring Plan. The Company anticipates that substantially all of these charges will involve employee termination benefits that will result in future cash outlays. For the three months ended June 29, 2014 the Company reversed $0.6 million of expense after determining certain termination benefit reserves would not be utilized. For the six months ended June 29, 2014, the Company incurred $8.1 million of charges primarily related to termination benefits. As of June 29, 2014, the Company had a reserve of $5.3 million in connection with this project. The Company expects to complete this program in 2014. 2014 Restructuring Charges In June 2014, the Company initiated programs to consolidate locations in Australia and terminate certain European distributor agreements in an effort to reduce costs. As a result of these actions, the Company estimates that it will incur an aggregate of $2 million to $3 million in restructuring and other impairment charges over the term of these restructuring programs, of which $1.8 million was incurred through June 29, 2014. These programs include costs related to termination benefits, contract termination costs and other exit costs. As of June 29, 2014, the Company has a reserve of $0.4 million in connection with these programs. The Company expects to complete the programs in 2014. LMA Restructuring Program In connection with the acquisition of substantially all of the assets of LMA International N.V. (the “LMA business”) in 2012, the Company formulated a plan related to the integration of the LMA business and the Company’s other businesses. The integration plan focuses on the closure of the LMA business’ corporate functions and the consolidation of manufacturing, sales, marketing, and distribution functions in North America, Europe and Asia. A reconciliation of the changes in accrued liabilities associated with the LMA restructuring program from December 31, 2013 through June 29, 2014 is set forth in the following table:
| Termination Benefits |  |  | Facility Closure Costs |  |  | Contract Termination Costs |  |  | Other Exit Costs |  |  | Total |
| (Dollars in thousands) |
Balance at December 31, 2013 | $ | 552 |  |  | $ | 427 |  |  | $ | 3,686 |  |  | $ | 16 |  |  | $ | 4,681 |
Subsequent accruals (reversals) |  | (29 | ) |  |  | (112 | ) |  |  | (3,231 | ) |  |  | — |  |  |  | (3,372 | )
Cash payments |  | (494 | ) |  |  | (317 | ) |  |  | (70 | ) |  |  | — |  |  |  | (881 | )
Foreign currency translation |  | — |  |  |  | 2 |  |  |  | (1 | ) |  |  | 1 |  |  |  | 2 |
Balance at June 29, 2014 | $ | 29 |  |  | $ | - |  |  | $ | 384 |  |  | $ | 17 |  |  | $ | 430 |
During the six months ended June 29, 2014, the Company reversed approximately $3.2 million in contract termination costs related to the settlement of a terminated distributor agreement. The Company does not expect to incur additional costs associated with this program. The Company expects to complete the program in 2015. 2013 Restructuring Charges In 2013, the Company initiated programs to consolidate manufacturing facilities in North America and warehouse facilities in Europe and terminate certain European distributor agreements in an effort to reduce costs. As a result of these actions, the Company estimates that it will incur an aggregate of up to $11.0 million in restructuring and other impairment charges over the term of these restructuring programs, of which $10.8 million was incurred through June 29, 2014. These programs entail costs related to termination benefits, contract termination costs and charges related to post-closing obligations associated with its acquired businesses. As of June 29, 2014, the Company has a reserve of $1.6 million in connection with these programs. The Company expects to complete the programs in 2015. 2012 Restructuring Charges In 2012, the Company identified opportunities to improve its supply chain strategy by consolidating its three North American warehouses into one centralized warehouse; and lower costs and improve operating efficiencies through the termination of certain distributor agreements in Europe, the closure of certain North American facilities and workforce reductions. Aside from nominal facility closure costs anticipated in 2014, the Company does not expect to incur additional costs associated with this program. As of June 29, 2014, the Company has a reserve of $0.6 million in connection with these projects. The Company expects to complete this program in 2015. Impairment Charges In the first quarter 2013, the Company recorded a $4.5 million in-process research and development (IPR&D) charge pertaining to a research and development project associated with the acquisition of the assets of Axiom Technology Partners LLP because technological feasibility had not yet been achieved and the Company determined that the subject technology had no future alternative use. There were no impairment charges recorded for the three and six months ended June 29, 2014 or for the three months ended June 30, 2013. The restructuring and other impairment charges recognized for the three and six months ended June 29, 2014 and June 30, 2013 consisted of the following:
Three Months Ended June 29, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(in thousands) | Termination Benefits |  |  | Facility Closure Costs |  |  | Contract Termination Costs |  |  | Other Exit Costs |  |  | Total |
2014 Manufacturing footprint realignment | $ | 8,577 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 8,577 |
2014 European restructuring plan |  | (566 | ) |  |  | — |  |  |  | 305 |  |  |  | 49 |  |  |  | (212 | )
2014 Restructuring charges |  | 476 |  |  |  | — |  |  |  | 1,174 |  |  |  | 131 |  |  |  | 1,781 |
LMA restructuring program |  | (29 | ) |  |  | (154 | ) |  |  | (2,759 | ) |  |  | — |  |  |  | (2,942 | )
2013 Restructuring charges |  | 317 |  |  |  | — |  |  |  | 57 |  |  |  | 22 |  |  |  | 396 |
2012 Restructuring charges |  | (9 | ) |  |  | 34 |  |  |  | — |  |  |  | — |  |  |  | 25 |
2011 Restructuring plan |  | — |  |  |  | (2 | ) |  |  | — |  |  |  | — |  |  |  | (2 | )
Total restructuring and other impairment charges | $ | 8,766 |  |  | $ | (122 | ) |  | $ | (1,223 | ) |  | $ | 202 |  |  | $ | 7,623 |
Three Months Ended June 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(in thousands) | Termination Benefits |  |  | Facility Closure Costs |  |  | Contract Termination Costs |  |  | Other Exit Costs |  |  | Total |
LMA restructuring program | $ | 802 |  |  | $ | 293 |  |  | $ | 2,839 |  |  | $ | 7 |  |  | $ | 3,941 |
2013 Restructuring charges |  | 1,131 |  |  |  | — |  |  |  | 3,391 |  |  |  | 2,828 |  |  |  | 7,350 |
2012 Restructuring charges |  | 1,216 |  |  |  | 102 |  |  |  | 293 |  |  |  | 5 |  |  |  | 1,616 |
2011 Restructuring plan |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
2007 Arrow integration program |  | — |  |  |  | 55 |  |  |  | — |  |  |  | — |  |  |  | 55 |
Total restructuring and other impairment charges | $ | 3,149 |  |  | $ | 450 |  |  | $ | 6,523 |  |  | $ | 2,840 |  |  | $ | 12,962 |
Six Months Ended June 29, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(in thousands) | Termination Benefits |  |  | Facility Closure Costs |  |  | Contract Termination Costs |  |  | Other Exit Costs |  |  | Total |
2014 Manufacturing footprint realignment | $ | 8,577 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 8,577 |
2014 European restructuring plan |  | 7,752 |  |  |  | — |  |  |  | 305 |  |  |  | 49 |  |  |  | 8,106 |
2014 Restructuring charges |  | 476 |  |  |  | — |  |  |  | 1,174 |  |  |  | 131 |  |  |  | 1,781 |
LMA restructuring program |  | (29 | ) |  |  | (112 | ) |  |  | (3,231 | ) |  |  | — |  |  |  | (3,372 | )
2013 Restructuring charges |  | 485 |  |  |  | — |  |  |  | 57 |  |  |  | 22 |  |  |  | 564 |
2012 Restructuring charges |  | (619 | ) |  |  | 354 |  |  |  | — |  |  |  | — |  |  |  | (265 | )
2011 Restructuring plan |  | — |  |  |  | 12 |  |  |  | — |  |  |  | — |  |  |  | 12 |
Total restructuring and other impairment charges | $ | 16,642 |  |  | $ | 254 |  |  | $ | (1,695 | ) |  | $ | 202 |  |  | $ | 15,403 |
Six Months Ended June 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(in thousands) | Termination Benefits |  |  | Facility Closure Costs |  |  | Contract Termination Costs |  |  | Other Exit Costs |  |  | Total |
LMA restructuring program | $ | 2,826 |  |  | $ | 374 |  |  | $ | 3,281 |  |  | $ | 115 |  |  | $ | 6,596 |
2013 Restructuring charges |  | 1,552 |  |  |  | — |  |  |  | 3,391 |  |  |  | 2,887 |  |  |  | 7,830 |
2012 Restructuring charges |  | 2,666 |  |  |  | 102 |  |  |  | 293 |  |  |  | 5 |  |  |  | 3,066 |
2007 Arrow integration program |  | — |  |  |  | 135 |  |  |  | — |  |  |  | — |  |  |  | 135 |
|  | 7,044 |  |  |  | 611 |  |  |  | 6,965 |  |  |  | 3,007 |  |  |  | 17,627 |
Impairment charges |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,494 |  |  |  | 4,494 |
Total restructuring and other impairment charges | $ | 7,044 |  |  | $ | 611 |  |  | $ | 6,965 |  |  | $ | 7,501 |  |  | $ | 22,121 |
Termination benefits include employee severance and retention for terminated employees. Facility closure costs include general operating costs incurred subsequent to production shut-down as well as equipment relocation and other associated costs. Contract termination costs include costs associated with terminating existing leases and distributor agreements. Other costs include legal, outplacement and employee relocation costs and other employee-related costs. Restructuring and other impairment charges by reportable segment for the three and six months ended June 29, 2014 and June 30, 2013 are set forth in the following table:
| Three Months Ended |  |  | Six Months Ended |
| June 29, 2014 |  |  | June 30, 2013 |  |  | June 29, 2014 |  |  | June 30, 2013 |
| (Dollars in thousands) |  |  | (Dollars in thousands) |
Restructuring and other impairment charges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Vascular North America | $ | 5,887 |  |  | $ | 130 |  |  | $ | 5,962 |  |  | $ | 627 |
Anesthesia/Respiratory North America |  | 1,151 |  |  |  | 762 |  |  |  | 1,178 |  |  |  | 2,669 |
Surgical North America |  | — |  |  |  | 2,800 |  |  |  | — |  |  |  | 7,294 |
EMEA |  | (1,575 | ) |  |  | 7,913 |  |  |  | 6,315 |  |  |  | 9,207 |
Asia |  | 519 |  |  |  | 147 |  |  |  | 597 |  |  |  | 245 |
OEM |  | — |  |  |  | 588 |  |  |  | — |  |  |  | 588 |
All other |  | 1,641 |  |  |  | 622 |  |  |  | 1,351 |  |  |  | 1,491 |
Total restructuring and other impairment charges | $ | 7,623 |  |  | $ | 12,962 |  |  | $ | 15,403 |  |  | $ | 22,121 |

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- Definition The entire disclosure of costs incurred for restructuring including, but not limited to, exit and disposal activities, remediation, implementation, integration, asset impairment, and charges against earnings from the write-down of assets. + References No definition available. + Details
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