RESTRUCTURING

6 Months Ended

Jun. 30, 2013

Restructuring and Related Activities [Abstract]

NOTE B – RESTRUCTURING

On May 8, 2013, our Board of Directors approved a restructuring of our vascular access manufacturing operations. This restructuring primarily includes our introducer and guidewire products produced under our Galt brand and produced for our OEM and distributor customers. We intend to retain the Galt brand and the full line of Galt labeled products, private label products, and bulk non-sterile products currently being produced at our Garland, Texas facility.

Commencing in the second quarter of 2013, we started the process of transferring a portion of our vascular access manufacturing to independent suppliers located in Latin America and a small portion of our current production to our specialty needle manufacturing facility located in North Attleboro, Massachusetts. By the end of 2014, we expect this transition to be completed and our manufacturing plant located in Garland, Texas to be closed (May 2013 through December 2014 is referred to as the “Restructuring Period”). With the exception of certain sales, marketing, planning and customer service positions, all jobs currently located at our Garland, Texas facility will be eliminated during the Restructuring Period. All affected employees will be provided with one-time termination benefits which will be recorded over the required remaining service period.

We believe the offshore outsourcing of our vascular access manufacturing will significantly reduce our costs, allowing us to remain competitive in a highly competitive medical device industry. We expect this outsourcing will also allow us to better respond to our customers’ needs and macroeconomic issues such as increased regulation, new taxes and decreased demand across the medical device industry. We expect to continue to invest and expand our product offerings in this business.

The following table summarizes the amounts related to our restructuring activities, which are recorded in our surgical products segments as “Restructuring expenses” in our condensed consolidated statements of comprehensive earnings (loss) (in thousands):

		Total Amount Expected to be Incurred		Amount Incurred Three Months Ended June 30, 2013		Amount Incurred Six Months Ended June 30, 2013
Severance costs	$	1,455	$	143	$	143
Contract termination costs		238		—		—
Other exit costs		91		—		—
	$	1,784	$	143	$	143

A reconciliation of the recorded liabilities associated with our restructuring follows (in thousands):

	Severance Costs		Contract Termination Costs		Other Exit Costs		Total
Balance as of January 1, 2013	$	—	$	—	$	—	$	—
Restructuring expenses		143		—		—		143
Balance as of June 30, 2013	$	143	$	—	$	—	$	143

As presented in our Condensed Consolidated Balance Sheets:	June 30, 2013		December 31, 2012
Accrued salaries, wages and payroll taxes	$	39	$	—
Other long-term liabilities		104		—
	$	143		—

In addition to the restructuring expenses above, we also incurred operational transition expenses related to the restructuring, such as training and duplicate labor to transition the Galt operations to Latin America and/or our NeedleTech facility. For the three and six months ended June 30, 2013, we incurred $157,000 and $250,000, respectively, of operational transition expenses in our surgical products segment as “Selling, general and administrative” expenses.

This restructuring plan is expected to be implemented through December 2014. Expected incremental expenses and capital expenditures are as follows:

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Incremental expenses of $3.7 to $4.1 million, consisting primarily of severance related restructuring expenses and operational transition expenses. The operations at our Garland, Texas plant are scheduled to be transitioned out through December 2014 and, accordingly, these incremental expenses related to the restructuring will be recorded over the Restructuring Period. No significant non-cash charges are expected to be recorded related to this restructuring.

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Capital expenditures of approximately $2.5 to $2.7 million. We plan to purchase and own this new capital equipment located in Latin America at our independent suppliers’ facilities. We also plan to transfer the existing equipment from our Garland, Texas facility to our independent suppliers and to our facility in North Attleboro, Massachusetts.