Restructuring and Other Charges

6 Months Ended

Jul. 01, 2022

Restructuring and Related Activities [Abstract]

The Company continuously evaluates the business and identifies opportunities to realign its resources to better serve its customers and markets, improve operational efficiency and capabilities, and lower its operating costs or improve profitability. To realize the benefits associated with these opportunities, the Company undertakes restructuring-type activities to transform its business. The Company incurs costs associated with these activities, which primarily include exit and disposal costs and other costs directly related to the restructuring initiative. The Company records exit and disposal costs (“restructuring charges”) as incurred in accordance with ASC 420, Exit or Disposal Cost Obligations, and are classified within Restructuring and other charges, while other costs directly related to the restructuring initiatives (“restructuring-related charges”) are classified within Cost of sales, Selling, general and administrative, and Research, development and engineering expenses in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

In addition, from time to time, the Company incurs costs associated with acquiring and integrating businesses, and certain other general expenses, including asset impairments. The Company classifies costs associated with these items within Restructuring and other charges in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Restructuring and other charges comprise the following (in thousands):


	Three Months Ended				Six Months Ended
	July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
Restructuring charges	$	(5)	$	191	$	1,098	$	845
Acquisition and integration costs	3,333		26		5,269		110
Other general expenses	205		62		501		239
Total restructuring and other charges	$	3,533	$	279	$	6,868	$	1,194

Restructuring programs

The following table comprises restructuring and restructuring-related charges by income statement classification for the three and six month periods ended July 1, 2022 (in thousands):


	Three Months Ended		Six Months Ended
	July 1, 2022		July 1, 2022
Restructuring charges:
Restructuring and other charges	$	(5)	$	1,098
Restructuring-related expenses(a):
Cost of sales	179		334
Selling, general and administrative	384		702
Research, development and engineering	326		503
Total restructuring and restructuring-related charges	$	884	$	2,637

__________

(a) Restructuring-related expenses primarily include retention bonuses and consulting expenses. Restructuring related expense for the three and six months ended July 2, 2021 were not material.

Operational excellence initiatives

The Company’s operational excellence (“OE”) initiatives mainly consist of costs associated with executing on its sales force, manufacturing, business process and performance excellence operational strategic imperatives. These projects focus on changing the Company’s organizational structure to match product line growth strategies and customer needs, transitioning its manufacturing process into a competitive advantage and standardizing and optimizing its business processes.

2022 OE Initiatives - Costs related to the Company’s 2022 OE initiatives are primarily recorded within the Medical segment or unallocated operating expenses and mainly include termination benefits. The Company estimates that it will incur aggregate pre-tax charges in connection with the 2022 OE initiatives of between approximately $3 million to $5 million, the majority of which are expected to be cash expenditures. As of July 1, 2022, total restructuring and restructuring-related charges incurred since inception were $0.7 million. These actions are expected to be substantially complete by the end of 2023.

(8.) RESTRUCTURING AND OTHER CHARGES (Continued)

2021 OE Initiatives - Costs related to the Company’s 2021 OE initiatives are primarily recorded within the Medical segment or unallocated operating expenses and mainly include termination benefits. The Company estimates that it will incur aggregate pre-tax charges in connection with the 2021 OE initiatives of between approximately $4 million to $5 million, the majority of which are expected to be cash expenditures. As of July 1, 2022, total restructuring and restructuring-related charges incurred since inception were $4.6 million. These actions are expected to be substantially complete by the end of 2022.

Strategic reorganization and alignment

The Company’s strategic reorganization and alignment (“SRA”) initiatives primarily include those that align resources with market conditions and the Company’s strategic direction in order to enhance the profitability of its portfolio of products.

2021 SRA Initiatives - During the fourth quarter of 2021, the Company initiated plans to exit certain markets served in our Medical segment to enhance profitability and reallocate manufacturing capacity needed to support our overall growth plans. The Company estimates that it will incur a range of pre-tax charges in connection with the 2021 SRA initiatives of approximately $5 million and $8 million, the majority of which are expected to be cash expenditures. Costs related to the Company’s 2021 SRA Initiatives are primarily recorded within the Medical segment and mainly include termination benefits. As of July 1, 2022, total restructuring and restructuring-related charges incurred since inception were $1.9 million. These actions are expected to be completed by the end of 2025.

The following table summarizes the activity for restructuring reserves (in thousands):


	Operational excellence initiatives		Strategic reorganization and alignment		Total
December 31, 2021	$	298	$	134	$	432
Charges incurred, net of reversals	704		394		1,098
Cash payments	(825)		(46)		(871)

July 1, 2022	$	177	$	482	$	659

Acquisition and integration

Acquisition and integration costs primarily consist of professional fees and other costs related to business acquisitions. During the six months ended July 1, 2022, acquisition and integration costs included $5.3 million of expenses primarily related to the acquisitions of Oscor and Aran.

Other general expenses

During the six months ended July 1, 2022 and July 2, 2021, the Company recorded expenses related to other initiatives not described above, which relate primarily to integration and operational initiatives to reduce future costs and improve efficiencies.