Restructuring Costs

12 Months Ended

Mar. 31, 2020

RESTRUCTURING AND IMPAIRMENT COSTS

During the fiscal years ended March 31, 2020 and 2019, Universal recorded restructuring and impairment costs related to business changes and various initiatives to adjust certain operations and reduce costs. For both fiscal years, those costs primarily related to the Company's flue-cured and burley leaf tobacco operations segment. There were no restructuring or impairment costs recorded for the fiscal year ended March 31, 2018.

Fiscal Year Ended March 31, 2020

In fiscal year 2020, the Company recorded restructuring and impairment costs totaling $7.5 million, primarily related to $3.4 million of employee termination benefits for a voluntary workforce reduction at the Company's tobacco facilities in North Carolina, $1.8 million of employee termination benefits for the Company's operations in Africa, and a $1.3 million impairment charge for machinery used by the Company's operations in Africa. Restructuring and impairment costs were also incurred in connection with downsizing efforts at several other locations around the Company.

Fiscal Year Ended March 31, 2019

Due to the decline in customer demand for tobaccos from Tanzania, as well as regulatory, tax, and other business and operating considerations, the Company undertook a formal review of the Tanzania leaf tobacco market and its operations there in the third quarter of fiscal year 2019. Based on that review, the Company’s operating subsidiaries in Tanzania took steps to reduce operating costs going forward, including discontinuation of a year-round workforce. As a result of that initiative, the subsidiaries recorded a $4.0 million restructuring charge for termination benefits paid to employees whose permanent positions were eliminated. All amounts related to termination benefit costs were paid by the end of fiscal year 2019.

In addition, as a result of the decrease in production volumes of Tanzania tobaccos and the associated reduced profitability, the Company determined that indicators of impairment in the carrying value of the property, plant and equipment comprising the Tanzania operations were present at December 31, 2018. Accordingly, based on the applicable accounting guidance, the Company tested the recoverability of those long-lived assets using undiscounted estimates of the future cash flows from the use of those assets and their eventual disposition. The property, plant and equipment were evaluated for recoverability using two distinct asset groups: (1) the land, building, and equipment comprising the processing facility, and (2) all remaining assets, which are substantially devoted to buying and receiving delivery of unprocessed leaf from farmers and marketing and shipping the processed tobacco to customers. The recoverability tests indicated that both asset groups were impaired at December 31, 2018. As a result, the Company determined the fair value of each asset group based principally on a probability-weighting of the discounted cash flows expected under multiple operating and disposition scenarios. An impairment charge of approximately $14.6 million was recorded to reduce the carrying value of the assets to their indicated fair values. The property, plant and equipment assets are used in buying, processing, and shipping and remains classified as “held and used” at this time as provided for under the accounting guidance. Should the expected cash flows from the future use and/or disposition of the assets change from the estimates on which their fair values were determined, additional impairment charges could be required, or gains or losses on any disposition of the assets could be recorded. The Company also had goodwill related to the Tanzanian operations of approximately $0.9 million which was separately tested for recoverability and fully written off based on the results of that test.

Additional restructuring costs of approximately $0.9 million were incurred in connection with downsizing efforts at other locations around the Company during fiscal year 2019.

A summary of the restructuring and impairment costs incurred during the fiscal years ended March 31, 2020 and 2019, is as follows:



	Fiscal Years Ended March 31,
	2020		2019
Restructuring Costs:
Employee termination benefits	$	5,356	$	4,608
Other restructuring costs	—		223
	5,356		4,831
Impairment Costs:
Property, plant, and equipment and other noncurrent assets	2,187		14,584
Goodwill	—		889
	$	2,187	$	15,473
Total restructuring and impairment costs	$	7,543	$	20,304

A reconciliation of the Company’s liability for employee termination benefits and other restructuring costs for fiscal years 2018 through 2020 is as follows:



	Employee Termination Benefits			Other Costs			Total
Balance at April 1, 2017	$	301		$	43		$	344
Fiscal Year 2018 Activity:
Payments	(272		)	(43		)	(315		)
Balance at March 31, 2018	29			—			29
Fiscal Year 2019 Activity:
Costs charged to expense	4,608			223			4,831
Payments	(4,014		)	—			(4,014		)
Balance at March 31, 2019	623			223			846
Fiscal Year 2020 Activity:
Costs charged to expense	5,356			—			5,356
Payments	(2,564		)	(223		)	(2,787		)
Balance at March 31, 2020	$	3,415		$	—		$	3,415

The restructuring liability at March 31, 2020 is expected to be paid during fiscal year 2021. Universal continually reviews its business for opportunities to realize efficiencies, reduce costs, and realign its operations in response to business changes. The Company may incur additional restructuring and impairment costs in future periods as business changes occur and additional cost savings initiatives are implemented.