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Special (Gains) and Charges

9 Months Ended

Sep. 30, 2011

2. Special (Gains) and Charges

Special (gains) and charges reported on the Consolidated Statement of Income include the following:

	Third Quarter Ended					Nine Months Ended
	September 30					September 30
(millions)	2011		2010			2011		2010

Cost of sales
Restructuring charges	$	4.5	$	—		$	5.3	$	—

Special (gains) and charges
Restructuring charges	12.6		—			52.8		—
Business structure and optimization	0.3		0.6			1.2		1.8
Cleantec acquisition integration costs	0.1		—			3.7		—
Nalco merger and integration costs	10.3		—			10.3		—
Gain on sale of investment	—		(5.9		)	—		(5.9		)
Venezuela currency devaluation	—		—			—		4.2
Business write-downs and closure	—		(0.4		)	—		(1.4		)
Other items	—		0.6			—		0.3
Total	23.3		(5.1		)	68.0		(1.0		)

Total special (gains) and charges	$	27.8	$	(5.1	)	$	73.3	$	(1.0	)

For segment reporting purposes, special gains and charges are included in the Corporate segment, which is consistent with the company’s internal management reporting.

Restructuring Charges

Following the implementation of new business systems in Europe, in February 2011, the company commenced a comprehensive plan to substantially improve the efficiency and effectiveness of its European business, sharpen its competitiveness and accelerate its growth and profitability. Additionally, restructuring will be undertaken outside of Europe, the costs of which are not expected to be significant (collectively, the “2011 Restructuring Plan”). Through the 2011 Restructuring Plan, approximately 900 positions are expected to be eliminated.

The company expects to incur pretax restructuring charges of approximately $150 million ($125 million after tax) through 2013, as the 2011 Restructuring Plan continues to roll out. Approximately $60 million to $70 million ($50 million to $60 million after tax) of those charges are expected to occur in 2011. The company anticipates that approximately $125 million of the pre-tax charge will represent cash expenditures. The remaining $25 million of the pre-tax charges represent estimated asset disposals. No decisions have been made for any remaining asset disposals and estimates could vary depending on the actual actions taken.

As a result of restructuring activities, the company recorded restructuring charges of $17.1 million ($14.8 million after tax) or $0.06 per diluted share and $58.1 million ($49.0 million after tax) or $0.21 per diluted share, during the third quarter and nine months ended September 30, 2011, respectively.

Restructuring charges and subsequent activity for the first nine months of 2011 related to the 2011 Restructuring Plan include the following:

	Employee
	Termination			Asset
(millions)	Costs			Disposals			Other			Total

2011 Restructuring Plan:

Recorded expense and accrual	$	52.4		$	0.5		$	5.2		$	58.1
Cash payments	(11.7		)	—			(1.7		)	(13.4		)
Non-cash charges	—			(0.5		)	—			(0.5		)
Effect of foreign currency translation	0.3			—			—			0.3

Restructuring liability, September 30, 2011	$	41.0		$	—		$	3.5		$	44.5

Restructuring charges have been included as a component of both cost of sales and special gains and charges on the Consolidated Statement of Income. Amounts included as a component of cost of sales include supply chain related severance. Restructuring liabilities have been classified as a component of other current liabilities on the Consolidated Balance Sheet.

Employee termination costs include personnel reductions and related costs for severance, benefits and outplacement services. Asset disposals include leasehold improvement write-downs. Other charges include lease terminations.

As previously disclosed, in 2009, the company completed restructuring and other cost-saving actions in order to streamline operations and improve efficiency and effectiveness (the “2009 Restructuring Plan”). The 2009 Restructuring Plan was finalized and all actions, except for certain cash payments, were completed as of December 31, 2009. As of December 31, 2010, the remaining liability related to the 2009 Restructuring Plan was $2.8 million. A minimal amount remains as a liability related to the 2009 Restructuring Plan as of September 30, 2011.

Non-restructuring Special (Gains) and Charges

In the third quarter of 2011, the company entered into an agreement and plan of merger with Nalco Holding Company (“Nalco”). Special gains and charges incurred during 2011 include $10.3 million of charges related to the anticipated merger, including costs for advisory and legal fees and integration costs. Further details related to the anticipated Nalco merger are included in Note 7.

In the first quarter of 2011, the company completed the purchase of the assets of the Cleantec business of Campbell Brothers Ltd., Brisbane, Queensland, Australia (“Cleantec”). Special gains and charges in 2011 include acquisition integration costs incurred to optimize the Cleantec business structure. Further details related to the Cleantec acquisition are included in Note 7.

In the third quarter of 2010, the company sold an investment in a small U.S. business and recognized a gain on the sale. The investment was not material to the company’s consolidated results of operations or financial position.

Beginning in 2010, Venezuela was designated hyper-inflationary and as such all foreign currency fluctuations are recorded in income. On January 8, 2010 the Venezuelan government devalued its currency, the Bolivar Fuerte. As a result of the devaluation, the company recorded a charge in the first quarter of 2010 due to the remeasurement of the local balance sheet using the “official” rate of exchange for the Bolivar Fuerte.