Restructuring and Other Charges

3 Months Ended

Apr. 01, 2012

Restructuring and Other Charges

Restructuring and Other Charges

4.Restructuring and Other Charges

The Company’s Board of Directors approves all major restructuring programs that involve the discontinuance of product lines or the shutdown of facilities.  From time to time, the Company takes additional restructuring actions, including involuntary terminations that are not part of a major program.  The Company accounts for these costs in the period that the individual employees are notified or the liability is incurred.  These costs are included in restructuring and other charges in the Company’s consolidated statements of operations.  In April 2011, the Board approved an integration program in association with the acquisition of Danfoss Socla S.A.S. (Socla).  The program was designed to integrate certain operations and management structures in the Watts and Socla organizations with a total estimated pre-tax cost of $6.4 million with costs being incurred through 2012.  As of December 31, 2011, the Company revised its forecast to $5.1 million due to lower than expected severance costs.

The Company also periodically initiates other actions which are not part of a major program.  In 2011, the Company initiated restructuring activities with respect to the Company’s operating facilities in Europe, which included the closure of a facility. The Europe restructuring activities are expected to include pre-tax costs of approximately $2.6 million, including costs for severance and shut down costs. The total net after-tax charge is $1.8 million with costs being incurred through 2012.  In 2012, the Company commenced restructuring activities in North America to relocate certain production activities, which include the closure of two manufacturing sites.  Total expected costs are $2.8 million, including severance and shutdown costs.  The net after tax charge of $1.8 million will be incurred through the middle of 2013.

A summary of the pre-tax cost by restructuring program is as follows:

	April 1, 2012		April 3, 2011
	(in millions)
Restructuring costs:
2010 Actions	$	—	$	0.9
2011 Actions	0.5		—
Other Actions	0.7		0.2
Total restructuring charges	1.2		1.1
Other charges related to impairments	0.5		—
Total restructuring and other charges	$	1.7	$	1.1

The Company recorded net pre-tax restructuring and other charges in its business segments as follows:

	April 1, 2012		April 3, 2011
	(in millions)
North America	$	0.4	$	0.1
EMEA	1.3		1.0
Total	$	1.7	$	1.1

2011 Actions

The following table summarizes the total expected, incurred and remaining pre-tax costs for the 2011 Socla integration program:

Reportable Segment	Total Expected Costs		Incurred through April 1, 2012		Remaining Costs at April 1, 2012
	(in millions)
EMEA	$	4.9	$	3.4	$	1.5
Asia	0.2		0.2		—
Total	$	5.1	$	3.6	$	1.5

The Company expects to spend the remaining costs by the end of 2012.

Details of the Company’s 2011 Socla integration reserves for the quarter ended April 1, 2012 are as follows:

	Severance			Facility exit and other		Total
				(in millions)
Balance at December 31, 2011	$	0.4		$	—	$	0.4
Net pre-tax restructuring charges	0.5			—		0.5
Utilization and foreign currency impact	(0.3		)	—		(0.3		)
Balance at April 1, 2012	$	0.6		$	—	$	0.6

The Company expects to exhaust the remaining reserve by mid-2012.

The following table summarizes expected, incurred and remaining costs for 2011 Socla integration actions by type:

	Severance			Facility exit and other		Total
				(in millions)
Expected costs	$	5.1		$	—	$	5.1
Costs Incurred - 2011	(3.1		)	—		(3.1		)
Costs Incurred — quarter ended April 1, 2012	(0.5		)	—		(0.5		)
Remaining costs at April 1, 2012	$	1.5		$	—	$	1.5