Discontinued Operations

6 Months Ended

Jul. 03, 2011

Discontinued Operations.

Discontinued Operations

3.   Discontinued Operations

In the first quarter of 2010, the Company recorded an estimated reserve of $5.3 million in discontinued operations in connection with the Foreign Corrupt Practices Act (FCPA) investigation at Watts Valve (Changsha) Co., Ltd. (CWV) (see Note 10). Based on ongoing discussions with Securities and Exchange Commission (SEC) staff, the Company now estimates a probable pre-tax charge in connection with this matter of approximately $3.8 million, which includes estimated disgorgement of profits, interest, fines, and penalties.  This adjustment to the reserve has been reflected in the Company results for the second quarter ended July 3, 2011 as income of $1.7 million in discontinued operations.  There is currently no definitive agreement with the SEC staff or Department of Justice (DOJ) for the resolution of this matter and any agreement will be subject to the approval by the Commissioners of the SEC and senior DOJ personnel. Therefore, there can be no assurance that the Company’s negotiations with the SEC staff and DOJ will result in a definitive agreement, and the amount of the loss upon final disposition of these matters may exceed its current estimate. See Note 3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Condensed operating statements for discontinued operations are summarized below:

	Second Quarter Ended					Six Months Ended
	July 3, 2011		July 4, 2010			July 3, 2011		July 4, 2010
	(in millions)
Reserve release(cost) - FCPA matter (CWV)	$	1.7	$	—		$	1.7	$	(5.6	)
Loss on sale — CWV	—		—			—		(0.1		)
Gain (loss) on disposal — TEAM	0.3		(0.1		)	0.3		(0.1		)
Income (loss) before income taxes	2.0		(0.1		)	2.0		(5.8		)
Income tax expense (benefit)	0.3		—			0.3		(1.6		)
Income (loss) from discontinued operations, net of taxes	$	1.7	$	(0.1	)	$	1.7	$	(4.2	)

The carrying amounts of major classes of assets and liabilities associated with discontinued operations are as follows:

	July 3, 2011		December 31, 2010
	(in millions)
Prepaid expenses and other assets	$	0.3	$	0.4
Deferred income taxes	1.3		1.4
Assets of discontinued operations	$	1.6	$	1.8
Accrued expenses and other liabilities	$	3.9	$	5.8
Liabilities of discontinued operations	$	3.9	$	5.8