Restructuring Charges

6 Months Ended

Jun. 30, 2011

Restructuring Charges

Restructuring Charges

8. Restructuring Charges

In October 2010, we adopted a reorganization plan (the Biomateriali Plan) that is designed to eliminate redundant costs resulting from our 2007 acquisition of Biomateriali and to improve efficiencies in manufacturing operations. We are transitioning the production of our AlboGraft Vascular Graft to our existing corporate headquarters in Burlington, Massachusetts. The Biomateriali Plan provides for the termination of 29 employees at our Biomaterial subsidiary, relocation of manufacturing equipment, the eventual dissolution of our Biomateriali subsidiary, and the hiring of additional employees to staff the required functions in Burlington. In 2010, we incurred $1.4 million of severance charges, of which $0.9 million was paid in December 2010, $0.3 million of charges related to the repayment of grants and loans received from the Italian government associated with business incentive programs for the Biomateriali facility (see Note 6), and $0.1 million of charges related to the abandonment of fixed assets and legal fees associated with the negotiation of the severance agreements. In 2011, we incurred $0.3 million of charges associated with the transfer of manufacturing equipment to our Burlington factory and $0.7 million of non-cash charges related to the write-down of an asset for deferred rent, which was triggered by our exit of the Biomateriali facility in March 2011. We paid $0.3 million of severance related charges in January 2011 and expect to pay the remaining $0.2 million in December 2011. The timing of the repayment of the grants and loans will be determined by the Italian government. We expect to incur approximately $0.1 million of additional restructuring charges related to this program in 2011. We expect the liquidation and dissolution process to be completed by mid-2012.

In May 2011, we adopted a reorganization plan (the LifeSpan Plan) that is designed to eliminate redundant costs resulting from our 2010 acquisition of the LifeSpan vascular graft and to improve efficiencies in manufacturing operations. We are transitioning the production of our LifeSpan vascular graft from Laguna Hills, California to our existing corporate headquarters in Burlington, Massachusetts. The LifeSpan Plan provides for the termination of 7 employees at Laguna Hills facility, relocation of manufacturing equipment, and the hiring of approximately 4 employees to staff the required functions in Burlington. We incurred approximately $11,000 of severance charges during the three months ended June 30, 2011. We expect to incur $0.2 million of restructuring charges associated with the closure of the facility, transfer of manufacturing equipment, and severance charges during the remainder of 2011.

On June 30, 2011, we terminated our relationship with our Spanish distributor resulting in a contract termination charge of $0.5 million which we recorded as restructuring charges (see Note 4 for further details regarding the transaction).

On June 30, 2011, we terminated our relationship with our Danish distributor resulting in a contract termination charge of $0.1 million which we recorded as restructuring charges (see Note 4 for further details regarding the transaction).

The components of our restructuring charges are as follows

	Three months ended June  30, 2011		Six months ended June 30, 2011
	(in thousands)
Transfer of manufacturing equipment	$	52	$	332
Distributor contract termination charges		572		572
Non-cash asset write-off		15		724
Severance		11		11
Other		—		16
Total	$	650	$	1,655

We did not incur restructuring charges during the three months and six months ended June 30, 2010.

Activity related to accrued restructuring costs is as follows:

	Six months ended June 30, 2011
	(in thousands)
Balance at beginning of period	$	922
Plus:
Current period restructuring costs		1,655
Less:
Payment of employee severance costs		339
Payment related to transfer of manufacturing equipment		326
Payment related to distribution contract termination		572
Other		69
Noncash restructuring charges		724
Balance at end of period	$	547

There was no activity related to accrued restructuring costs during the six months ended June 30, 2010.