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Other Operating (Income) Expense, Net
 6 Months Ended
Jun. 29, 2012
Other Operating (Income) Expense, Net [Abstract]  
OTHER OPERATING (INCOME) EXPENSE NET

9. OTHER OPERATING (INCOME) EXPENSE, NET

 Other Operating (Income) Expense, Net is comprised of the following (in thousands):
             
  Three Months Ended Six Months Ended
   June 29,  July 1,  June 29,  July 1,
   2012  2011  2012  2011
 Orthopaedic facility optimization(a)$1,978 $22 $2,322 $261
 Medical device facility optimization(b) 565  0  894  0
 ERP system upgrade(c) 1,912  0  2,807  0
 Integration costs(d) 112  0  1,055  0
 Asset dispositions, severance and other(e) 1,356  (542)  1,590  (614)
  $5,923 $(520) $8,668 $(353)

(a) Orthopaedic facility optimization. In 2010, the Company began updating its Indianapolis, IN facility to streamline operations, consolidate two buildings, increase capacity, further expand capabilities and reduce dependence on outside suppliers. This initiative was completed in 2011.

       

In 2011, the Company began construction on an orthopaedic manufacturing facility in Fort Wayne, IN and will transfer the manufacturing operations currently being performed at its Columbia City, IN location into this new facility. The construction of the Fort Wayne facility was completed in June 2012 and the transfer of operations from the Columbia City facility is expected to be completed in the third quarter of 2012.

 

In the third quarter of 2012, the Company finalized plans to transfer most major functions currently performed at its facilities in Orvin and Corgemont, Switzerland into existing facilities in Fort Wayne, IN and Tijuana, Mexico by the end of 2013.

 

The total capital investment expected for these initiatives is between $30 million and $40 million, of which $22 million has been expended to date. Total expense expected to be incurred for these initiatives is between $30 million and $36 million, of which $3.0 million has been incurred to date. All expenses will be recorded within the Implantable Medical segment and are expected to include the following:

 

  • Severance and retention: $11 million - $13 million;
  • Production inefficiencies, moving and revalidation: $3 million - $4 million;
  • Accelerated depreciation and asset write-offs: $10 million - $12 million;
  • Personnel: $5 million - $6 million; and
  • Other: $1 million.

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  Personnel  Other  Total
AtDecember 30, 2011$0 $0 $0 $0 $0 $0
Restructuring charges 26   1,218  0   624   454   2,322
Cash payments (26)  (1,218)  0  (624)  (454)  (2,322)
AtJune 29, 2012$0 $0 $0 $0 $0 $0

(b) Medical device facility optimization. Near the end of 2011, the Company initiated plans to upgrade and expand its manufacturing infrastructure in order to support its medical device strategy. This will include the transfer of certain product lines to create additional capacity for the manufacture of medical devices, expansion of two existing facilities, as well as the purchase of equipment to enable the production of medical devices. These initiatives are expected to be completed over the next two to three years. Total capital investment under these initiatives is expected to be between $15 million to $20 million of which approximately $3.9 million has been expended to date. Total expenses expected to be incurred on these projects is between $2 million to $3 million of which $0.9 million has been incurred to date. All expenses will be recorded within the Implantable Medical segment and are expected to include the following:

 

  • Production inefficiencies, moving and revalidation: $0.5 million - $1 million;
  • Personnel: $1 million - $1.5 million; and
  • Other: $1.0 million.

The change in accrued liabilities related to the medical device facility expansion is as follows (in thousands):
             
   Production Inefficiencies, Moving and Revalidation  Personnel  Other  Total
AtDecember 30, 2011$0 $0 $0 $0
Restructuring charges  205   99   590   894
Cash payments (205)  (99)  (590)  (894)
AtJune 29, 2012$0 $0 $0 $0

(c) ERP system upgrade. In 2011, the Company initiated plans to upgrade its existing global ERP system. This initiative is expected to be completed over the next two years. Total capital investment under this initiative is expected to be between $4 million to $5 million of which approximately $2.0 million has been expended to date. Total expenses expected to be incurred on this initiative is between $5 million to $7 million of which $2.8 million has been incurred to date. Expenses related to this initiative will be recorded within the applicable segment and corporate cost centers that the expenditures relate to and include the following:

 

  • Training and consulting costs: $3 million - $4.5 million; and
  • Accelerated depreciation and asset write-offs: $2 million – $2.5 million.

 

 

The change in accrued liabilities related to the ERP system upgrade is as follows (in thousands):
          
   Training & Consulting Costs  Accelerated Depreciation/ Asset Write-offs  Total
AtDecember 30, 2011$0 $0 $0
Charges  1,015   1,792  2,807
Write-offs 0  (1,792)  (1,792)
Cash payments (555)  0  (555)
AtJune 29, 2012$460 $0 $460

(d) Integration costs. During 2012, the Company incurred costs related to the integration of Micro Power and NeuroNexus. These expenses were primarily for retention bonuses, travel costs in connection with integration efforts, training and severance, which will not be required or incurred after the integrations are completed.

 

(e) Asset dispositions, severance and other. During 2012 and 2011, the Company recorded (gains) write-downs in connection with various asset disposals, net of insurance proceeds received, if any. Additionally, during the second quarter of 2012, the Company incurred $1.2 million of costs related to the relocation of its global headquarters to Frisco, Texas.