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Other Operating Expenses, Net
9 Months Ended
Sep. 30, 2011
Other Operating Expenses, Net [Abstract] 
OTHER OPERATING EXPENSES, NET

8. OTHER OPERATING (INCOME) EXPENSE, NET

 Other Operating (Income) Expense, Net is comprised of the following (in thousands):
             
  Three Months Ended Nine Months Ended
  September 30, October 1, September 30, October 1,
  2011 2010 2011 2010
 Orthopaedic facility optimization(a)$ 164 $ 59 $ 425 $ 59
 2007 & 2008 facility shutdowns and consolidations(b)  -   165   -   1,021
 Integration costs(c)  -   5   -   135
 Asset dispositions and other(d) 23   96  (591)   597
  $ 187 $ 325 $ (166) $ 1,812

(a) Orthopaedic facility optimization. In the third quarter of 2010, the Company began updating its Indianapolis, IN facility to streamline operations, consolidate buildings, increase capacity, further expand capabilities and reduce dependence on outside suppliers. Ultimately these updates will further reduce lead times, improve quality and allow the Company to better meet the needs of its customers.

       

In the first quarter of 2011, the Company announced that it would construct an 80,000 square foot manufacturing facility in Allen County, IN and transfer the manufacturing operations currently being performed at its Columbia City, IN location into this new facility. The Company broke ground on this new facility in the second quarter of 2011 and is expected to be completed by mid-2012.

 

In October 2011, the Board of Directors approved a multi-faceted plan to further enhance, optimize and leverage the Company's manufacturing infrastructure. This plan includes the next phase of the Company's Orthopaedic facility optimization initiative and includes the opening of two Orthopaedic design centers, transferring production of certain Orthopaedic product lines to the Company's lower cost manufacturing facilities and the consolidation of the Company's Orthopaedic operations in Switzerland. These initiatives are expected to be completed over the next two to three years.

 

The total capital investment in connection with these initiatives is expected to be between $40 million and $45 million, of which approximately $8 million has been incurred to date. The total expense for these optimization projects is expected to be between $9 million and $11 million of which $0.7 million has been incurred to date. All expenses are cash expenditures, except accelerated depreciation and asset write-offs, and are recorded within the Greatbatch Medical segment. The remaining capital investment and expenses are expected to be incurred over the next two to three years.

 The change in accrued liabilities related to the orthopaedic facility optimization is as follows (in thousands):
                 
    Severance and Retention  Production Inefficiencies, Moving and Revalidation  Accelerated Depreciation/Asset Write-offs  Other  Total
 AtDecember 31, 2010$ - $ - $ - $ - $ -
 Restructuring charges  -   397   18   10   425
 Write-offs  -   -   (18)   -   (18)
 Cash payments  -   (397)   -   (10)   (407)
 AtSeptember 30, 2011$0 $0 $0 $0 $0

(b) 2007 & 2008 facility shutdowns and consolidations. From 2007 to 2010, the Company completed the following facility shutdowns and consolidation initiatives:

 

  • Consolidated its Electrochem manufacturing facilities in Canton, MA, Teterboro, NJ and Suzhou, China, into a newly constructed facility in Raynham, MA;

  • Consolidated its corporate offices in Clarence, NY into its technology center also in Clarence, NY;
  • Reorganized and consolidated various general and administrative and research and development functions throughout the organization in order to optimize those resources with the businesses it acquired in 2007 and 2008;
  • Consolidated its Orchard Park, NY (Electrochem manufacturing), Exton, PA (Orthopaedic corporate office) and Saignelegier, Switzerland (Orthopaedic manufacturing) facilities into existing facilities that had excess capacity; and
  • Consolidated its manufacturing operations in Blaine, MN into its Plymouth, MN facility.

 

The total expenses incurred for these facility shutdowns and consolidations was $17.3 million and included the following:

 

  • Severance and retention - $4.4 million;
  • Production inefficiencies, moving and revalidation - $5.2 million;
  • Accelerated depreciation and asset write-offs - $5.3 million;
  • Personnel - $0.7 million; and
  • Other - $1.7 million.

 

All categories of expenses were cash expenditures, except accelerated depreciation and asset write-offs. Costs incurred during 2010 primarily related to the Electrochem Solutions business segment.

 

(c) Integration costs. During 2010, the Company incurred costs related to the integration of companies acquired in 2007 and 2008. The integration initiatives include the implementation of the Oracle ERP system, training and compliance with Company policies, as well as the implementation of lean manufacturing and six sigma initiatives. These expenses were primarily for consultants, relocation and travel costs.

 

(d) Asset dispositions and other. During 2011 and 2010, the Company recorded (gains) write-downs in connection with various asset disposals, net of insurance proceeds received, if any.