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Restructuring charges | 9 Months Ended
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Sep. 25, 2016
Restructuring and Related Activities [Abstract] |
Restructuring charges | Note 4 — Restructuring charges 2016 Other Restructuring Program During the third quarter 2016, the Company committed to actions associated with consolidation of operations impacting three manufacturing facilities, including certain of those obtained in recent acquisitions, as well as certain global administrative functions. The actions commenced in the third quarter 2016 and are expected to be substantially complete by the end of the first quarter 2018. The Company estimates that it will record aggregate pre-tax charges of $2.5 million to $3.5 million related to these actions, substantially all of which constitute termination benefits that will result in future cash outlays. Additionally, the Company expects to incur approximately $1 million of accelerated depreciation and other costs directly related to the program and expect these costs to be recognized in cost of goods sold, of which, approximately $0.5 million is expected to result in future outlays. The Company recorded restructuring charges, specifically, employee termination benefits, of $1.7 million during the three and nine months ended September 25, 2016 related to these actions. As of September 25, 2016, the Company has a reserve of $1.7 million related to this program. 2016 Manufacturing Footprint Realignment Plan On February 23, 2016, the Board of Directors of the Company approved a restructuring plan (the “2016 Plan") designed to reduce costs, improve operating efficiencies and enhance the Company’s long term competitive position. The 2016 Plan, which was developed in response to continuing cost pressures in the healthcare industry, primarily involves the relocation of certain manufacturing operations, the relocation and outsourcing of certain distribution operations and a related workforce reduction at certain of the Company's facilities. These actions commenced in the first quarter 2016 and are expected to be substantially completed by the end of 2018. The Company estimates that it will incur aggregate pre-tax charges in connection with the 2016 Plan of between approximately $34 million to $44 million, of which an estimated $27 million to $31 million are expected to result in future cash outlays. Most of these charges, and the related cash outlays, are expected to be made prior to the end of 2018. The following table provides a summary of the Company's current cost estimates for each major expense category associated with the 2016 Plan:
Type of expense | Total estimated amount expected to be incurred
Employee termination benefits | $14 million to $15 million
Facility closure and other exit costs (1) | $2 million to $3 million
Accelerated depreciation charges | $10 million to $13 million
Other (2) | $8 million to $13 million
| $34 million to $44 million
(1) Includes costs to transfer product lines among facilities, legal, outplacement and employee relocation costs. (2) Consists of other costs directly related to the 2016 Plan, including project management and other regulatory costs. The Company recorded charges of $2.8 million during the three months ended September 25, 2016 related to the 2016 Plan, of which $0.9 million consisted mainly of employee termination benefits recorded as restructuring expense, and $1.9 million related to accelerated depreciation and other costs, which primarily were recorded as cost of goods sold. The Company recorded $15.5 million during the nine months ended September 25, 2016 related to the 2016 Plan, of which $11.3 million consisted mainly of employee termination benefits recorded as restructuring expense, and $4.2 million related to accelerated depreciation and other costs, which primarily were recorded as cost of goods sold. As of September 25, 2016, the Company has a reserve of $10.5 million related to this program. As the 2016 Plan progresses, management will reevaluate the estimated expenses set forth above, and may revise its estimates, as appropriate, consistent with GAAP. 2015 Restructuring Programs During 2015, the Company committed to programs associated with the reorganization of certain of its businesses and the consolidation of certain of its facilities in North America. For the three months ended September 25, 2016, the Company recorded charges of $0.1 million related to these programs. As of September 25, 2016, the Company has incurred net aggregate restructuring charges related to the plan of $6.4 million. As of September 25, 2016, the Company has a reserve of $0.5 million related to these programs. 2014 Manufacturing Footprint Realignment Plan In April 2014, the Company's 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 facilities, and the relocation of manufacturing operations from certain higher-cost locations to existing lower-cost locations. These actions commenced in the second quarter 2014. During the third quarter 2016, the Company revised its expense and timing estimates related to the 2014 Manufacturing Footprint Realignment Plan to reflect the impact of changes the Company has implemented with respect to medication delivery devices included in certain of the kits primarily sold by the Company’s Vascular North America operating segment and, to a lesser extent, the Company's Anesthesia North America operating segment. The Company estimates that it will incur aggregate pre-tax charges in connection with the 2014 Manufacturing Footprint Realignment Plan of approximately $43 million to $48 million, compared to the Company’s prior estimate of approximately $37 million to $44 million. The Company expects aggregate cash outlays associated with the plan to be in the range of $33 million to $38 million, compared to its prior estimate of approximately $26 million to $31 million. Most of these charges and cash outlays are expected to be incurred prior to 2020. Additionally, as of September 25, 2016, the Company continues to expect to incur $24 million to $30 million in aggregate capital expenditures under the plan. The Company currently expects that the 2014 Manufacturing Footprint Realignment Plan will be substantially complete by the end of the first half of 2020 rather than the end of 2017, which was previously estimated. The following table provides a summary of the Company’s cost estimates by major type of expense associated with the 2014 Manufacturing Footprint Realignment Plan, which reflect the revised estimates:
Type of expense | Total estimated amount expected to be incurred
Employee termination benefits | $11 million to $12 million
Facility closure and other exit costs (1) | $1 million to $2 million
Accelerated depreciation charges | $10 million to $10 million
Other (2) | $21 million to $24 million
| $43 million to $48 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 charges of $2.8 million and $6.8 million for the three and nine months ended September 25, 2016, respectively, related to the 2014 Manufacturing Footprint Realignment Plan. Of this amount, $2.5 million and $6.9 million for the three and nine months ended September 25, 2016, respectively, were recorded in costs of goods sold, and related to accelerated depreciation and certain other costs, primarily for the transfer of manufacturing operations from the existing locations to the new locations. For the three months ended September 25, 2016, the charges also included $0.3 million in restructuring expense. During the nine months ended September 25, 2016, the Company recorded a net reversal of previously recorded restructuring charges of $0.1 million. As of September 25, 2016, the Company has incurred net aggregate restructuring charges related to the plan of $10.8 million. Additionally, as of September 25, 2016, the Company has incurred net aggregate accelerated depreciation and certain other costs, primarily for the transfer of manufacturing operations from the existing locations to the new locations in connection with the plan of $21.3 million, which were primarily included in cost of goods sold. As of September 25, 2016, the Company has a restructuring reserve of $5.9 million in connection with the plan, all of which relates to termination benefits. As the 2014 Manufacturing Footprint Realignment Plan progresses, management will reevaluate the estimated expenses and charges set forth above, and may revise its estimates, as appropriate, consistent with generally accepted accounting principles. For additional information regarding the Company's restructuring programs, see Note 4 to the Company's consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2015. The restructuring charges recognized for the three and nine months ended September 25, 2016 and September 27, 2015 consisted of the following:
Three Months Ended September 25, 2016 |  |  |  |  |  |  |  |  |
| Termination Benefits |  | Facility Closure Costs |  | Contract Termination Costs |  | Other Exit Costs |  | Total
| (Dollars in thousands)
2016 Other Restructuring programs | $ | 1,713 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,713 |
2016 Manufacturing footprint realignment plan | 851 |  |  | — |  |  | — |  |  | 74 |  |  | 925 |
2015 Restructuring programs | (103 | ) |  | 54 |  |  | 107 |  |  | — |  |  | 58 |
2014 Manufacturing footprint realignment plan | 308 |  |  | — |  |  | — |  |  | 6 |  |  | 314 |
2014 European restructuring plan | 15 |  |  | — |  |  | — |  |  | 2 |  |  | 17 |
Total restructuring charges | $ | 2,784 |  |  | $ | 54 |  |  | $ | 107 |  |  | $ | 82 |  |  | $ | 3,027 |
Three Months Ended September 27, 2015 |  |  |  |  |  |  |  |  |
| Termination Benefits |  | Facility Closure Costs |  | Contract Termination Costs |  | Other Exit Costs |  | Total
| (Dollars in thousands)
2015 Restructuring programs | $ | (198 | ) |  | $ | 37 |  |  | $ | 78 |  |  | $ | 9 |  |  | $ | (74 | )
2014 Manufacturing footprint realignment plan | 619 |  |  | (3 | ) |  | 163 |  |  | 52 |  |  | 831 |
2014 European restructuring plan | (97 | ) |  | — |  |  | — |  |  | — |  |  | (97 | )
Total restructuring charges | $ | 324 |  |  | $ | 34 |  |  | $ | 241 |  |  | $ | 61 |  |  | $ | 660 |
Nine Months Ended September 25, 2016 |  |  |  |  |  |  |  |  |
| Termination Benefits |  | Facility Closure Costs |  | Contract Termination Costs |  | Other Exit Costs |  | Total
| (Dollars in thousands)
2016 Other Restructuring programs | $ | 1,713 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,713 |
2016 Manufacturing footprint realignment plan | 10,919 |  |  | — |  |  | — |  |  | 360 |  |  | 11,279 |
2015 Restructuring programs | (502 | ) |  | 232 |  |  | 200 |  |  | 118 |  |  | 48 |
2014 Manufacturing footprint realignment plan | (118 | ) |  | — |  |  | — |  |  | 17 |  |  | (101 | )
Other restructuring programs (1) | 15 |  |  | — |  |  | (86 | ) |  | 8 |  |  | (63 | )
Total restructuring charges | $ | 12,027 |  |  | $ | 232 |  |  | $ | 114 |  |  | $ | 503 |  |  | $ | 12,876 |
Nine Months Ended September 27, 2015 |  |  |  |  |  |  |  |  |
| Termination Benefits |  | Facility Closure Costs |  | Contract Termination Costs |  | Other Exit Costs |  | Total
| (Dollars in thousands)
2015 Restructuring programs | $ | 3,361 |  |  | $ | 166 |  |  | $ | 723 |  |  | $ | 56 |  |  | $ | 4,306 |
2014 Manufacturing footprint realignment | 831 |  |  | 241 |  |  | 389 |  |  | 36 |  |  | 1,497 |
Other restructuring programs (2) | (181 | ) |  | 2 |  |  | 29 |  |  | 35 |  |  | (115 | )
Total restructuring charges | $ | 4,011 |  |  | $ | 409 |  |  | $ | 1,141 |  |  | 127 |  |  | $ | 5,688 |
(1) | Other restructuring programs include the 2014 European Restructuring Plan and the 2012 Restructuring Program. For a description of these plans, see Note 4 to the Company’s consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2015.
(2) | Other restructuring programs include the 2014 European Restructuring Plan, the Other 2014 restructuring programs, the 2013 Restructuring programs and the LMA restructuring program. For a description of these plans, see Note 4 to the Company’s consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2015.
Termination benefits include estimated employee retention, severance and benefit payments for terminated employees. Facility closure costs include general operating costs incurred subsequent to production shutdown as well as legal costs, equipment relocation and other associated costs. Contract termination costs include costs associated with terminating existing leases and distributor agreements. Other costs include outplacement and employee relocation costs and other employee-related costs. Restructuring charges by reportable operating segment for the three and nine months ended September 25, 2016 and September 27, 2015 are set forth in the following table:
| Three Months Ended |  | Nine Months Ended
| September 25, 2016 |  | September 27, 2015 |  | September 25, 2016 |  | September 27, 2015
| (Dollars in thousands) |  | (Dollars in thousands)
Restructuring charges |  |  |  |  |  |  |
Vascular North America | $ | 960 |  |  | $ | 232 |  |  | $ | 5,474 |  |  | $ | 2,466 |
Anesthesia North America | 946 |  |  | (250 | ) |  | 3,185 |  |  | 284 |
Surgical North America | 277 |  |  | 36 |  |  | 257 |  |  | 282 |
EMEA | 89 |  |  | (64 | ) |  | 3,012 |  |  | (139 | )
Asia | — |  |  | 2 |  |  | — |  |  | 3 |
OEM | 187 |  |  | — |  |  | 191 |  |  | — |
All other | 568 |  |  | 704 |  |  | 757 |  |  | 2,792 |
Total restructuring charges | $ | 3,027 |  |  | $ | 660 |  |  | $ | 12,876 |  |  | $ | 5,688 |

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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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