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Restatement of Condensed Consolidated Financial Statements (Unaudited)
 9 Months Ended
Sep. 28, 2012
Accounting Changes and Error Corrections [Abstract]  
Correction of Immaterial Errors
Restatement of Condensed Consolidated Financial Statements (Unaudited)
On October 29, 2012, the Company announced that it had identified historical accounting errors relating to inventory. The inventory accounting issues resulted in understated cost of sales and overstated inventory balances for the years ended December 31, 2011, 2010 and 2009. For the years ended December 31, 2011, 2010, 2009, and 2008, for the three and nine months ended September 30, 2011 cost of sales was understated by $17.9 million, $8.3 million, $5.6 million, $7.1 million, $4.7 million and $13.0 million, respectively. As of December 31, 2011, 2010, 2009 and 2008 and September 30, 2011 inventory balances were overstated by $40.0 million, $27.0 million, $17.4 million, $8.7 million and $43.2 million, respectively.
The Company believes that the inventory accounting issues are, to a significant extent, attributable to a complex theft scheme in Brazil and, to a somewhat lesser extent, accounting errors, primarily in Brazil, affecting work in process and finished goods inventory that were not detected due to a deficient reconciliation process. In addition, due to accounting errors at one of the Brazilian facilities that occurred prior to the Company's acquisition of Phelps Dodge International Corporation ("PDIC") in 2007, the Company overstated inventory in its allocation of the purchase price among assets acquired, resulting in an understatement of goodwill. The understated goodwill and overstated inventory associated with the acquisition of PDIC in the fourth quarter of 2007 is each $3.4 million.
The Company is also restating inventory, property, plant and equipment, accumulated other comprehensive income and retained earnings to correct two additional accounting errors associated with foreign currency adjustments, described below.
The Company incorrectly recorded foreign currency adjustments related to certain intercompany transactions between the Company's U.S. and Canadian subsidiaries in other comprehensive income rather than in retained earnings. The Company has corrected this error in the accompanying restated financial statements. As of December 31, 2011 and 2010, accumulated other comprehensive income was overstated, and retained earnings were understated, by $6.5 million, before consideration of the related income tax provision of $3.0 million.
The Company also made erroneous foreign currency adjustments related to inventory and property, plant and equipment within the Company's Mexican subsidiary. The Company has corrected this error in the accompanying financial statements. As of December 31, 2011, 2010 and 2009, inventory was overstated by $3.1 million and property plant and equipment was overstated by $5.0 million, while retained earnings were understated by $8.1 million. In addition, cost of sales is understated for the year ended December 31, 2009 by $8.1 million.
The following discloses each line item that is affected by the restatement of the Company's condensed consolidated financial statements as of and for the three and nine months ended September 30, 2011.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss):
 
Three Fiscal Months Ended September 30, 2011
(in millions, except per share data)
As Previously Reported
Effect of Restatement
Restated
Cost of sales
$
1,361.4

$
4.7

$
1,366.1

Gross profit
156.4

(4.7
)
151.7

Operating income
63.4

(4.7
)
58.7

Income before income taxes
8.7

(4.7
)
4.0

Income tax (provision) benefit
(5.5
)
(1.0
)
(6.5
)
Net income (loss) including noncontrolling interest
4.0

(5.7
)
(1.7
)
Net income (loss) attributable to Company common shareholders
3.6

(5.7
)
(2.1
)
Comprehensive income (loss)
(143.5
)
1.7

(141.8
)
Earnings (loss) per common share - basic
0.07

(0.11
)
(0.04
)
Earnings (loss) per common share - assuming dilution
0.07

(0.11
)
(0.04
)
 
Nine Fiscal Months Ended September 30, 2011
(in millions, except per share data)
As Previously Reported
Effect of Restatement
Restated
Cost of sales
$
3,999.6

$
13.0

$
4,012.6

Gross profit
498.0

(13.0
)
485.0

Operating income
216.3

(13.0
)
203.3

Income before income taxes
121.1

(13.0
)
108.1

Income tax (provision) benefit
(42.1
)
(1.2
)
(43.3
)
Net income (loss) including noncontrolling interest
81.2

(14.2
)
67.0

Net income (loss) attributable to Company common shareholders
79.3

(14.2
)
65.1

Comprehensive income (loss)
(18.3
)
(9.3
)
(27.6
)
Earnings (loss) per common share - basic
1.52

(0.27
)
1.25

Earnings (loss) per common share - assuming dilution
1.47

(0.26
)
1.21


Condensed Consolidated Statements of Cash Flows:
 
Nine Fiscal Months Ended September 30, 2011
(in millions)
As Previously Reported
Effect of Restatement
Restated
Net income (loss) including noncontrolling interests
$
81.2

$
(14.2
)
$
67.0

Deferred income taxes
(27.0
)
0.1

(26.9
)
(Increase) decrease in inventories
(159.0
)
12.9

(146.1
)
Increase (decrease) in Accounts Payable, Accrued and Other Liabilities
124.2

1.2

125.4


There was no impact to net cash flows from operating activities as a result of this restatement.