Graco 2005 Annual Report Download - page 51

Plan'') that commenced in the fourth quarter of 2005. The Plan is designed to reduce manufacturing
overhead to achieve best cost positions, and to allow the Company to increase investment in new product
development, brand building and marketing. Project Acceleration includes the closures of approximately
one-third of the Company's 80 manufacturing facilities (as of September 2005), optimizing the Company's
geographic footprint.
The Plan is expected to result in cumulative restructuring charges totaling between $350 million and
$400 million ($295 million Ì $340 million after tax), with between $170 million and $200 million
($145 million Ì $170 million after tax) to be incurred in 2006. Approximately 60% of the charges are
expected to be cash charges. Annualized savings are projected to exceed $120 million upon conclusion of
the program in 2008.
Project Acceleration commenced in December 2005, resulting in a non-cash facility restructuring
charge aggregated by reportable business segment as follows (in millions):
Segment Provision
Cleaning & Organization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $29.3
OÇce Products ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.6
Tools & HardwareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.8
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.6
$51.3
The restructuring actions approved in 2005 related to Project Acceleration will result in the closure of
9 facilities, with anticipated cash costs, primarily employee severance, related to these actions to be
between $25 million and $30 million. As of December 31, 2005, no expenses were recorded related to
these cash costs, as notiÑcation to the aÅected employees had not been made.
Pre-Acceleration Restructuring Activities
The Company announced a signiÑcant restructuring plan (the ""2001 Plan'') on May 3, 2001. The
speciÑc objectives of the 2001 Plan were to streamline the Company's supply chain to become the best-
cost global provider throughout the Company's portfolio by reducing worldwide headcount and
consolidating duplicative manufacturing facilities. The Company recorded $461.7 million in restructuring
charges under the 2001 Plan, including $99.9 million for discontinued operations. While the accounting
charges associated with the 2001 Plan were completed in the second quarter of 2004, the Company
continued to selectively approve individual restructuring plans. The following table shows the restructuring
costs, net of reversals, recognized under the terms of the 2001 Plan and for the selective restructuring
actions prior to Project Acceleration for the years ended December 31, excluding restructuring costs
related to discontinued operations (in millions):
2005 2004 2003
Facility and other exit costsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7.7 $39.6 $ 83.2
Employee severance and termination beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11.4 3.0 80.2
Exited contractual commitments and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.8 1.6 25.9
Restructuring Costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $20.9 $44.2 $189.3
Restructuring provisions were determined based on estimates prepared at the time the speciÑc
restructuring actions were approved by management, and also include amounts recognized as incurred. In
2005 and 2004, the Company reduced its restructuring reserve by approximately $6.4 million and
$14.2 million, respectively, primarily as a result of higher proceeds received from the sale of property, plant
and equipment and favorable negotiations on exited contracts. Cash paid for restructuring activities was
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