Other Operating (Income) Expenses, Net | 3 Months Ended |
Apr. 04, 2014 |
Other Income and Expenses [Abstract] | ' |
OTHER OPERATING (INCOME) EXPENSES, NET | ' |
OTHER OPERATING (INCOME) EXPENSES, NET |
Other Operating (Income) Expenses, Net is comprised of the following (in thousands): |
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| Three Months Ended | | | | | | | | |
| 4-Apr-14 | | 29-Mar-13 | | | | | | | | |
2013 operating unit realignment | $ | 1,003 | | | $ | — | | | | | | | | | |
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Orthopaedic facility optimization (income) costs | (1,157 | ) | | 2,636 | | | | | | | | | |
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Medical device facility optimization | 11 | | | 105 | | | | | | | | | |
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ERP system upgrade (income) costs | (72 | ) | | 321 | | | | | | | | | |
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Acquisition and integration (income) costs | (428 | ) | | 111 | | | | | | | | | |
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Asset dispositions, severance and other | 429 | | | 65 | | | | | | | | | |
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| $ | (214 | ) | | $ | 3,238 | | | | | | | | | |
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2013 operating unit realignment. In June 2013, the Company initiated a plan to realign its operating structure in order to optimize its continued focus on profitable growth. As part of this initiative, the sales and marketing and operations groups of its former Implantable Medical and Electrochem Solutions (“Electrochem”) reportable segments were combined into one sales and marketing and one operations group serving the entire Company. This initiative is expected to be completed during the first half of 2014. Total restructuring charges expected to be incurred in connection with this realignment are between $7.0 million and $7.5 million, of which $6.6 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: |
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• | Severance and retention: $5.3 million – $5.4 million; and | | | | | | | | | | | | | | |
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• | Other: $1.7 million – $2.1 million. | | | | | | | | | | | | | | |
Other costs primarily consist of relocation, recruitment and travel expenditures. |
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The change in accrued liabilities related to the 2013 operating unit realignment is as follows (in thousands): |
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| Severance and | | Other | | Total | | | | |
Retention | | | | |
At January 3, 2014 | $ | 465 | | | $ | 746 | | | $ | 1,211 | | | | | |
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Restructuring charges | 867 | | | 136 | | | 1,003 | | | | | |
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Cash payments | (938 | ) | | (803 | ) | | (1,741 | ) | | | | |
At April 4, 2014 | $ | 394 | | | $ | 79 | | | $ | 473 | | | | | |
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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 transferred manufacturing operations being performed at its Columbia City, IN location into this new facility. This initiative was completed in 2012. |
During 2012, the Company transferred manufacturing and development operations performed at its facilities in Orvin and Corgemont, Switzerland into existing facilities in Fort Wayne, IN and Tijuana, Mexico. In connection with this consolidation, in 2012, the Company entered into an agreement to sell assets related to certain non-core Swiss orthopaedic product lines to an independent third party including inventory, machinery, equipment, customer lists and technology related to these product lines. This transaction closed during the first quarter of 2013 and the Company received payments totaling $4.7 million in connection with this transaction and the third party assumed $2.4 million of severance liabilities. During the first quarter of 2014, the Company received an additional contingent payment of $2.5 million from the third party in connection with the achievement of certain milestones defined in the sales agreement. The gain was recognized in Other Operating (Income) Expenses, Net in the Condensed Consolidated Statement of Operations. |
During 2013, the Company began a project to expand its Chaumont, France facility in order to enhance its capabilities and fulfill larger volume customer supply agreements. This initiative is expected to be completed over the next three years. |
The total capital investment expected for these initiatives is between $30 million and $35 million, of which $22.3 million has been expended to date. Total expense expected to be incurred for these initiatives is between $43 million and $48 million, of which $40.0 million has been incurred to date. All expenses will be recorded within the Greatbatch Medical segment and are expected to include the following: |
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• | Severance and retention: approximately $11 million; | | | | | | | | | | | | | | |
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• | Accelerated depreciation and asset write-offs: approximately $13 million; and | | | | | | | | | | | | | | |
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• | Other: $19 million – $24 million. | | | | | | | | | | | | | | |
Other costs include production inefficiencies, moving, revalidation, personnel, training and travel costs associated with these consolidation projects. |
All expenses are cash expenditures, except accelerated depreciation and asset write-offs. The change in accrued liabilities related to the orthopaedic facility optimization is as follows (in thousands): |
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| Severance | | Accelerated | | Other | | Total |
and | Depreciation/Asset |
Retention | Write-offs |
At January 3, 2014 | $ | — | | | $ | — | | | $ | 857 | | | $ | 857 | |
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Restructuring charges (income) | — | | | (2,531 | ) | | 1,374 | | | (1,157 | ) |
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Cash (payments) receipts | — | | | 2,531 | | | (1,423 | ) | | 1,108 | |
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At April 4, 2014 | $ | — | | | $ | — | | | $ | 808 | | | $ | 808 | |
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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 includes 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 year. Total capital investment under these initiatives is expected to be between $15 million and $20 million, of which approximately $12.5 million has been expended to date. Total expenses expected to be incurred on these projects is between $2.0 million and $3.0 million, of which $1.8 million has been incurred to date. All expenses will be recorded within the Greatbatch Medical segment and are expected to include the following: |
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• | Production inefficiencies, moving and revalidation: $0.5 million – $1.0 million; | | | | | | | | | | | | | | |
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• | Personnel: $1.0 million – $1.5 million; and | | | | | | | | | | | | | | |
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• | Other: approximately $1.0 million. | | | | | | | | | | | | | | |
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The change in accrued liabilities related to the medical device facility optimization is as follows (in thousands): |
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| Production | | Personnel | | Other | | Total |
Inefficiencies, |
Moving and |
Revalidation |
At January 3, 2014 | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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Restructuring charges | — | | | 1 | | | 10 | | | 11 | |
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Cash payments | — | | | (1 | ) | | (10 | ) | | (11 | ) |
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At April 4, 2014 | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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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 three months. Total capital investment under this initiative is expected to be between $4.0 million to $4.3 million of which approximately $4.0 million has been expended to date. Total expenses expected to be incurred on this initiative is between $6.0 million to $6.5 million, of which $5.8 million has been incurred to date. Expenses related to this initiative are recorded within the applicable segment and corporate cost centers that the expenditures relate to and include the following: |
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• | Training and consulting costs: $4 million; and | | | | | | | | | | | | | | |
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• | 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): |
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| Training & | | Accelerated | | Total | | | | |
Consulting | Depreciation/Asset | | | | |
Costs | Write-offs | | | | |
At January 3, 2014 | $ | — | | | $ | — | | | $ | — | | | | | |
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Income | (72 | ) | | — | | | (72 | ) | | | | |
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Cash receipts | 72 | | | — | | | 72 | | | | | |
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At April 4, 2014 | $ | — | | | $ | — | | | $ | — | | | | | |
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Acquisition and integration (income) costs. During 2014 and 2013, the Company incurred (income) cost related to the integration of Micro Power Electronics, Inc. and NeuroNexus Technologies, Inc., which were acquired in December 2011 and February 2012, respectively. These expenses were primarily for retention bonuses, travel costs in connection with integration efforts, training, severance, and the change in fair value of the contingent consideration recorded in connection with these acquisitions. Refer to Note 13 "Fair Value Measurements" for discussion on changes in fair value of the contingent consideration. |
Asset dispositions, severance and other. During 2014 and 2013, the Company recorded charges in connection with various other strategic initiatives and asset disposals/write-downs. |