Restructuring and Review of Strategic Alternatives and Operational Structure

July 2014 restructuring program

In July 2014, the Company announced a comprehensive restructuring program. The restructuring program, which builds on the Company's previously launched productivity and asset optimization plans, is focused on the closure of certain underperforming assets as well as the consolidation and realignment of other facilities. The Company is also implementing initiatives to reduce selling, general and administrative ("SG&A") expenses globally. During the first quarter of 2015, the Company continued with incremental restructuring actions including SG&A cost reduction and further asset optimization plans in North America and Europe.

The Company expects to incur approximately $225 million in before-tax restructuring charges. The total expected costs are $27 million in the North America segment, $145 million in the Europe segment, $38 million in the Latin America segment and $15 million in the Africa/Asia Pacific segment. As of April 3, 2015, aggregate costs incurred are $10.7 million in the North America segment, $124.7 million in the Europe segment, $31.6 million in the Latin America segment, and $14.8 million in the Africa/Asia Pacific segment. For the three months ended April 3, 2015, the Company incurred charges of $15.5 million. In the three months ended April 3, 2015, costs incurred were $3.9 million in the North America segment, $9.1 million in the Europe segment, $2.9 million in the Latin America segment, and $(0.4) million in the Africa/Asia Pacific segment. For the three months ended April 3, 2015, approximately $8.6 million of these charges were recorded in the Cost of sales caption and $6.9 million of these charges were recorded as SG&A expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), respectively. Restructuring costs incurred consist primarily of employee separation costs and asset-related costs to exit or realign facilities. The Company is also incurring other costs as outlined below. Changes in the restructuring reserve and activity for the three months ended April 3, 2015 are below (in millions):



	Employee Separation Costs			Asset-Related Costs			Other Costs			Total
Total expected restructuring charges	$	70.0		$	125.0		$	30.0		$	225.0
Balance, December 31, 2014	$	32.4		$	—		$	1.0		$	33.4
Net provisions	9.6			1.2			4.7			15.5
Net benefits charged against the assets	—			(1.2		)	(2.1		)	(3.3		)
Payments	(6.9		)	—			(2.5		)	(9.4		)
Foreign currency translation	(2.5		)	—			(0.1		)	(2.6		)
Balance, April 3, 2015	$	32.6		$	—		$	1.0		$	33.6
Remaining expected restructuring charges	$	21.7		$	6.3		$	15.2		$	43.2

Employee Separation Costs

The Company recorded employee separation costs of $9.6 million in the three months ended April 3, 2015, consisting of $3.7 million in North America, $5.0 million in Europe, $0.8 million in Latin America, and $0.1 million in Africa/Asia Pacific.

Employee separation costs include severance, retention bonuses and pension costs. As of April 3, 2015, employee separation costs included severance charges for approximately 1,130 employees; approximately 915 of these employees were classified as manufacturing employees and approximately 215 of these employees were classified as non-manufacturing employees. The charges relate to involuntary separations and the amounts are based on current salary levels and past service periods and are either considered one-time employee termination benefits in accordance with ASC 420 - Exit or Disposal Cost Obligations or as charges for contractual termination benefits under ASC 712 - Compensation - Nonretirement Postemployment Benefits.

Asset-Related Costs

The Company recorded asset-related costs of $1.2 million in the three months ended April 3, 2015. The long-lived asset impairment charges primarily consist of $1.8 million in Latin America in the three months ended April 3, 2015.

Asset-related costs consist of both asset write-downs and accelerated depreciation. Asset write-downs relate to the establishment of a new fair value basis for assets to be classified as held-for-sale or to be disposed of, as well as asset impairment charges for asset groups to be held-and-used in locations which are being restructured and it has been determined the undiscounted cash flows expected to result from the use and eventual disposition of the assets are less than their carrying value. Charges for accelerated depreciation relate to long-lived assets that will be taken out of service prior to the end of their normal service period. Management will continue to evaluate the recoverability of the carrying amount of its long-lived assets as the restructuring program is executed.

To determine the fair value, a current appraisal of each impaired asset groups' machinery and equipment and real property, as applicable, was performed utilizing standard valuation approaches, which incorporate Level 3 inputs. The Company assesses impairment at the asset group level which represents the lowest level for which identifiable cash flows can be determined independent of other groups of assets and liabilities. The asset groups at the Company are primarily each manufacturing unit, unless the cash flows of the manufacturing unit are not independent due to shared production, distribution and sale of the finished product. The Company considered the expected net cash flows to be generated by the use of each asset group, as well as the expected cash proceeds from the disposition of the assets, if any, to determine fair value. The impairment charges were recorded in the Cost of sales caption in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The Company notes the plan to abandon a long-lived asset before the end of its previously estimated useful life is a change in accounting estimate per ASC 250 - Accounting Changes and Error Corrections. The annual depreciation impact from the asset write-downs and changes in estimated useful lives is immaterial.

Other Costs

The Company recorded other restructuring-type charges of $4.7 million in the three months ended April 3, 2015. The other restructuring-type charges were $0.2 million in North America, $4.7 million in Europe, $0.3 million in Latin America, and $(0.5) million in Africa/Asia Pacific.

Other restructuring-type charges are incurred as a direct result of the restructuring program. Such charges primarily include working capital write-downs not associated with normal operations, equipment relocation, termination of contracts and other immaterial costs.

October 2014 review of strategic alternatives and operational structure

In October 2014, the Company announced the intent to divest all of the Company's operations in Africa and Asia Pacific in order to simplify the Company's geographic portfolio and reduce operational complexity. The October divestiture plan is focused on the sale and closure of the Company's non-core assets. The Company expects to incur approximately $14 million in pre-tax charges consisting primarily of legal and transaction fees for the dispositions. Such amounts are reflected in the North America segment. Charges incurred in the three months ended April 3, 2015 were immaterial.

As part of this plan, in the first quarter of 2015, the Company completed the sale of its interests in joint ventures including Dominion Wire and Cables ("Fiji"), 51% interest, and Keystone Electric Wire and Cable ("Keystone"), 20% interest, for cash consideration of $9.3 million and $11.0 million, respectively. In the three months ended April 3, 2015, the pre-tax loss on the sale from the disposition of Fiji recognized was $2.6 million and the pre-tax gain from the disposition of Keystone recognized was $3.6 million and are included in the SG&A caption in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Also, as part of this plan, in the fourth quarter of 2014, the Company completed the sale of its interest in Phelps Dodge International Philippines, Inc. (“PDP”) and Phelps Dodge Philippines Energy Products Corporation (“PDEP”) for cash consideration of $67.1 million. The results of PDP and PDEP are reported in the Africa/Asia Pacific segment for the three months ended March 28, 2014. The pre-tax loss of PDP and PDEP for the three months ended March 28, 2014 was $2.3 million. The pre-tax loss attributable to the Company for the three months ended March 28, 2014 was $1.4 million.The pre-tax profit of PDP and PDEP for the year ended December 31, 2014 was $10.4 million. The pre-tax profit attributable to the Company for the year ended December 31, 2014 was $6.2 million. The pre-tax gain on the sale from the disposition of PDP and PDEP recognized in the quarter ended December 31, 2014 was $17.6 million and is included in the SG&A caption in the Consolidated Statements of Operations and Comprehensive Income (Loss). The sale of PDP and PDEP is considered a disposal of significant component of an entity.

The Company reviewed each component entity in the Company's Africa/Asia Pacific reportable segment to determine if the assets should be considered held for sale. As of April 3, 2015, the Company determined that the remaining component entities within the Africa/Asia Pacific segment did not meet the held for sale criteria set forth in ASC 360 primarily driven by management’s belief that the probability of a sale within one year is uncertain. The Company assessed the discontinued operations financial reporting treatment for those businesses which were contemplated as part of the divestiture plan. Management believes the planned actions in total meet the requirements of a strategic shift that has (or will have) a major effect on an entity’s operations and financial results; however, none of the remaining entities within the component group meet the requirements to be considered held for sale at April 3, 2015 as noted above, and the individual and combined results of the entities that have been disposed of to date (PDP and PDEP, Fiji and Keystone) are not considered a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. Therefore, the financial results of the Africa/Asia Pacific reportable segment are presented as continuing operations in the Condensed Consolidated Financial Statements.