Realignment Programs and Industrial Product Division (IPD) Recovery Plan

9 Months Ended

Sep. 30, 2011

Realignment Programs and Industrial Product Division (IPD) Recovery Plan [Abstract]

Realignment Programs and Industrial Product Division (IPD) Recovery Plan

6. Realignment Programs and Industrial Product Division (“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 September 30, 2011. We currently expect total charges related to these realignment programs will be approximately $92 million, of which $89.7 million has been incurred through September 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, net of adjustments, related to our Realignment Programs were $1.2 million and $2.1 million for the three months ended September 30, 2011 and September 30, 2010, respectively, and $3.3 million and $10.2 million for the nine months ended September 30, 2011 and September 30, 2010, respectively.

     The restructuring reserve related to the Realignment Programs was $1.4 million and $7.1 million at September 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 nine months ended September 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 nine months ended September 30, 2011, all of which were incurred in the second quarter of 2011.