Realignment Programs and IPD Recovery Plan

6 Months Ended

Jun. 30, 2011

Realignment Programs and IPD Recovery Plan [Abstract]

Realignment Programs and IPD Recovery Plan

6. Realignment Programs and IPD Recovery Plan

     Beginning in 2009, we initiated realignment programs to reduce and optimize certain non-strategic manufacturing facilities and our overall cost structure by improving our operating efficiency, reducing redundancies, maximizing global consistency and driving improved financial performance, as well as expanding our efforts to optimize assets, respond to reduced orders and drive an enhanced customer-facing organization (“Realignment Programs”). Most of the realignment initiatives related to these programs have been substantially completed as of June 30, 2011 and we currently expect total charges related to these realignment programs will be approximately $92 million, of which $88.5 million has been incurred through June 30, 2011. Total expected realignment charges represent management’s best estimate to date, and actual realignment charges incurred could vary from total expected charges as all initiatives are finalized.

     The Realignment Programs consist of both restructuring and non-restructuring charges. Restructuring charges represent costs associated with the relocation of certain business activities, outsourcing of some business activities and facility closures. Non-restructuring charges are costs incurred to improve operating efficiency and reduce redundancies and primarily represent employee severance. Charges are reported in Cost of Sales (“COS”) or Selling, General & Administrative Expense (“SG&A”), as applicable, in our condensed consolidated statements of income, net of adjustments related to changes in estimates of previously recorded amounts.

     Charges related to our Realignment Programs were $1.3 million and $7.6 million for the three months ended June 30, 2011 and June 30, 2010, respectively. For the three months ended June 30, 2010, Industrial Product Division (“IPD”) and FCD incurred $4.1 million and $3.1 million of charges, respectively.

     Charges related to our Realignment Programs were $2.1 million ($2.0 million in IPD) and $8.1 million ($4.3 million in IPD and $3.1 million in FCD) for the six months ended June 30, 2011 and June 30, 2010, respectively.

     The restructuring reserve related to the Realignment Programs was $2.2 million and $7.1 million at June 30, 2011 and December 31, 2010, respectively. Other than cash payments, there was no significant activity related to the restructuring reserve during the three or six months ended June 30, 2011.

     In addition, in connection with our previously announced IPD recovery plan, in the second quarter of 2011 we initiated new activities to optimize structural parts of IPD’s business. We expect charges related to this program to be non-restructuring in nature and will approximate $9 million, of which $7.1 million was incurred and recorded in COS for the three months ended June 30, 2011.