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Restructuring and other impairment charges | 9 Months Ended
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Sep. 28, 2014
Restructuring and Related Activities [Abstract] |
Restructuring and other impairment charges | Restructuring and other impairment charges 2014 Manufacturing Footprint Realignment Plan 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 the relocation of manufacturing operations from certain higher-cost locations to existing lower-cost locations. These actions commenced in the 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 $2.1 million and $11.6 million for the three and nine months ended September 28, 2014, respectively, related to the 2014 Manufacturing Footprint Realignment Plan. Of these amounts, $0.2 million and $8.7 million were recorded as restructuring expense for the three and nine months ended September 28, 2014, respectively, and $1.9 million and $2.9 million, which related to accelerated depreciation and other costs resulting from the plan for the three and nine months ended September 28, 2014, respectively, were recorded as cost of sales. As of September 28, 2014, the Company has a restructuring reserve of $8.7 million in connection with the 2014 Manufacturing Footprint Realignment Plan all of which relates to termination benefits. As the 2014 Manufacturing Footprint Realignment Plan 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 $9 million in connection with implementation of the 2014 European Restructuring Plan, of which $8.7 million was incurred through September 28, 2014, primarily related to termination benefits. As of September 28, 2014, the Company had a reserve of $3.2 million in connection with the 2014 European Restructuring Plan. The Company expects to complete this plan in 2014. Other 2014 Restructuring Programs 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 approximately $3 million in restructuring and other impairment charges over the term of these restructuring programs, of which $2.1 million was incurred through September 28, 2014. These programs include costs related to termination benefits, contract termination costs and other exit costs. As of September 28, 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 commenced a program (the "LMA Restructuring Program") related to the integration of the LMA business and the Company’s other businesses. The program 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 September 28, 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 | ) |  | (3,211 | ) |  | — |  |  | (3,352 | )
Cash payments | (533 | ) |  | (317 | ) |  | (104 | ) |  | — |  |  | (954 | )
Foreign currency translation | 10 |  |  | 2 |  |  | (14 | ) |  | — |  |  | (2 | )
Balance at September 28, 2014 | $ | — |  |  | $ | — |  |  | $ | 357 |  |  | $ | 16 |  |  | $ | 373 |
During the nine months ended September 28, 2014, the Company reversed approximately $3.2 million in contract termination costs related to the favorable settlement of a terminated distributor agreement. The Company expects future restructuring expenses associated with this program, if any, to be nominal. The Company expects to complete the program in 2015. 2013 Restructuring Programs 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 $10.9 million was incurred through September 28, 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 September 28, 2014, the Company has a reserve of $1.3 million in connection with these programs. The Company expects to complete the programs in 2015. 2012 Restructuring Program 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. The Company expects future restructuring expenses associated with this program, if any, to be nominal. As of September 28, 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 May 2012 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. In the third quarter of 2013, the Company recorded $3.4 million in impairment charges related to assets held for sale that had a carrying value in excess of their appraised fair value. There were no impairment charges recorded for the three and nine months ended September 28, 2014. The restructuring and other impairment charges recognized for the three and nine months ended September 28, 2014 and September 29, 2013 consisted of the following:
Three Months Ended September 28, 2014 |  |  |  |  |  |  |  |  |
(in thousands) | Termination Benefits |  | Facility Closure Costs |  | Contract Termination Costs |  | Other Exit Costs |  | Total
2014 Manufacturing footprint realignment plan | $ | 129 |  |  | $ | — |  |  | $ | — |  |  | $ | 42 |  |  | $ | 171 |
2014 European restructuring plan | 537 |  |  | 1 |  |  | 1 |  |  | 27 |  |  | 566 |
Other 2014 restructuring programs | 25 |  |  | — |  |  | 202 |  |  | 62 |  |  | 289 |
LMA restructuring program | — |  |  | — |  |  | 20 |  |  | — |  |  | 20 |
2013 Restructuring programs | (124 | ) |  | — |  |  | 186 |  |  | — |  |  | 62 |
Total restructuring and other impairment charges | $ | 567 |  |  | $ | 1 |  |  | $ | 409 |  |  | $ | 131 |  |  | $ | 1,108 |
Three Months Ended September 29, 2013 |  |  |  |  |  |  |  |  |
(in thousands) | Termination Benefits |  | Facility Closure Costs |  | Contract Termination Costs |  | Other Exit Costs |  | Total
LMA restructuring program | $ | 492 |  |  | $ | 162 |  |  | $ | 1,097 |  |  | $ | 17 |  |  | $ | 1,768 |
2013 Restructuring programs | 891 |  |  | — |  |  | (65 | ) |  | — |  |  | 826 |
2012 Restructuring program | 559 |  |  | 539 |  |  | — |  |  | — |  |  | 1,098 |
2007 Arrow integration program | — |  |  | 38 |  |  | — |  |  | — |  |  | 38 |
| 1,942 |  |  | 739 |  |  | 1,032 |  |  | 17 |  |  | 3,730 |
Impairment charges | — |  |  | — |  |  | — |  |  | 3,354 |  |  | 3,354 |
Total restructuring and other impairment charges | $ | 1,942 |  |  | $ | 739 |  |  | $ | 1,032 |  |  | $ | 3,371 |  |  | $ | 7,084 |
Nine Months Ended September 28, 2014 |  |  |  |  |  |  |  |  |
(in thousands) | Termination Benefits |  | Facility Closure Costs |  | Contract Termination Costs |  | Other Exit Costs |  | Total
2014 Manufacturing footprint realignment plan | $ | 8,706 |  |  | $ | — |  |  | $ | — |  |  | $ | 42 |  |  | $ | 8,748 |
2014 European restructuring plan | 8,289 |  |  | 1 |  |  | 306 |  |  | 76 |  |  | 8,672 |
Other 2014 restructuring programs | 501 |  |  | — |  |  | 1,376 |  |  | 193 |  |  | 2,070 |
LMA restructuring program | (29 | ) |  | (112 | ) |  | (3,211 | ) |  | — |  |  | (3,352 | )
2013 Restructuring programs | 361 |  |  | — |  |  | 243 |  |  | 22 |  |  | 626 |
2012 Restructuring program | (619 | ) |  | 354 |  |  | — |  |  | — |  |  | (265 | )
2011 Restructuring program | — |  |  | 12 |  |  | — |  |  | — |  |  | 12 |
Total restructuring and other impairment charges | $ | 17,209 |  |  | $ | 255 |  |  | $ | (1,286 | ) |  | $ | 333 |  |  | $ | 16,511 |
Nine Months Ended September 29, 2013 |  |  |  |  |  |  |  |  |
(in thousands) | Termination Benefits |  | Facility Closure Costs |  | Contract Termination Costs |  | Other Exit Costs |  | Total
LMA restructuring program | $ | 3,318 |  |  | $ | 536 |  |  | $ | 4,378 |  |  | $ | 132 |  |  | $ | 8,364 |
2013 Restructuring programs | 2,443 |  |  | — |  |  | 3,326 |  |  | 2,887 |  |  | 8,656 |
2012 Restructuring program | 3,225 |  |  | 641 |  |  | 293 |  |  | 5 |  |  | 4,164 |
2007 Arrow integration program | — |  |  | 173 |  |  | — |  |  | — |  |  | 173 |
| 8,986 |  |  | 1,350 |  |  | 7,997 |  |  | 3,024 |  |  | 21,357 |
Impairment charges | — |  |  | — |  |  | — |  |  | 7,848 |  |  | 7,848 |
Total restructuring and other impairment charges | $ | 8,986 |  |  | $ | 1,350 |  |  | $ | 7,997 |  |  | $ | 10,872 |  |  | $ | 29,205 |
Termination benefits include employee retention payments and severance payments and benefits 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 nine months ended September 28, 2014 and September 29, 2013 are set forth in the following table:
| Three Months Ended |  | Nine Months Ended
| September 28, 2014 |  | September 29, 2013 |  | September 28, 2014 |  | September 29, 2013
| (Dollars in thousands)
Restructuring and other impairment charges |  |  |  |  |  |  |
Vascular North America | $ | (54 | ) |  | $ | 2,233 |  |  | $ | 5,908 |  |  | $ | 2,860 |
Anesthesia/Respiratory North America | 15 |  |  | 332 |  |  | 1,193 |  |  | 3,001 |
Surgical North America | — |  |  | — |  |  | — |  |  | 7,294 |
EMEA | 849 |  |  | 2,221 |  |  | 7,164 |  |  | 11,428 |
Asia | 111 |  |  | 202 |  |  | 708 |  |  | 447 |
OEM | — |  |  | — |  |  | — |  |  | 588 |
All other | 187 |  |  | 2,096 |  |  | 1,538 |  |  | 3,587 |
Total restructuring and other impairment charges | $ | 1,108 |  |  | $ | 7,084 |  |  | $ | 16,511 |  |  | $ | 29,205 |

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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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