Note D – Restructuring and Other Expense (Income)

In fiscal 2008, we initiated a Transformation Plan (the “Transformation Plan”) with the overall goal to improve our sustainable earnings potential, asset utilization and operational performance. The Transformation Plan focuses on cost reduction, margin expansion and organizational capability improvements and, in the process, seeks to drive excellence in three core competencies: sales; operations; and supply chain management. The Transformation Plan is comprehensive in scope and includes aggressive diagnostic and implementation phases. When this process began, we retained a consulting firm to assist in the development and implementation of the Transformation Plan. As the Transformation Plan progressed, we formed internal teams dedicated to this effort, and they ultimately assumed full responsibility for executing the Transformation Plan. Although the consulting firm was again engaged as we rolled out the Transformation Plan in our Pressure Cylinders operating segment, most of the work is now being done by our internal teams. These internal teams are now an integral part of our business and constitute what we refer to as the Centers of Excellence (“COE”). The COE will continue to monitor the performance metrics and new processes instituted across our transformed operations and drive continuous improvements in all areas of our operations. The expenses related to the COE have been included in selling, general and administrative (“SG&A”) expense since the beginning of fiscal 2013.

To date, we have completed the transformation phases in each of the core facilities within our Steel Processing operating segment, including the facilities of our Mexican joint venture, Serviacero. We also substantially completed the transformation phases at our metal framing facilities prior to their contribution to ClarkDietrich. Transformation efforts within our Pressure Cylinders and Engineered Cabs operating segments, which began during the first quarter of fiscal 2012 and the first quarter of fiscal 2013, respectively, are ongoing.

A progression of the liabilities associated with our restructuring activities, combined with a reconciliation to the restructuring and other expense (income) financial statement caption in our consolidated statement of earnings for fiscal 2014, is summarized as follows:


(in thousands)	Beginning Balance		Expense			Payments			Adjustments			Ending Balance
Early retirement and severance	$	5,029	$	6,236		$	(4,703	)	$	(67	)	$	6,495
Facility exit and other costs		1,200		2,477			(3,021	)		(122	)		534

	$	6,229		8,713		$	(7,724	)	$	(189	)	$	7,029

Net gain on sale of assets				(10,589	)
Less: joint venture transactions				(1,036	)

Restructuring and other income			$	(2,912	)

Approximately $6,399,000 of the total liability shown in the table above is expected to be paid in the next twelve months. The remaining liability, which consists of certain severance benefits, will be paid through September 2016.

During fiscal 2014, the following actions were taken in connection with the Transformation Plan:

•

In connection with the wind-down of our former Metal Framing operating segment, we recognized $924,000 of facility exit and other costs and a loss of $112,000 related to the sale of certain retained assets. These costs were recognized within the joint venture transactions financial statement caption in our consolidated statement of earnings to correspond with amounts previously recognized in connection with the formation of ClarkDietrich and the subsequent wind-down of our former Metal Framing operating segment.

•

In connection with the closure of our commercial stairs business, we incurred facility exit charges of $652,000.

•

In connection with the consolidation of the BernzOmatic hand torch manufacturing operation in Medina, New York into the existing Pressure Cylinders’ facility in Chilton, Wisconsin, we recognized an additional accrual of $578,000 for expected employee severance costs and $377,000 of facility exit costs. During the fourth quarter of fiscal 2013, we had recognized a $2,488,000 accrual for expected severance costs related to this matter.

•

On June 30, 2013, the Company completed the sale of Integrated Terminals, its warehouse facility in Detroit, Michigan, for cash proceeds of $7,457,000, resulting in a gain of $4,762,000.

•

On November 12, 2013, the Company entered into an agreement to sell the operating assets related to its steel high pressure and acetylene cylinders business in North America, resulting in a gain of $5,939,000. In connection with this transaction, the Company recognized a $3,714,000 accrual for expected severance costs and incurred facility exit charges of $524,000.

•

On December 10, 2013, the Company announced the closure of its Baltimore steel facility, which ceased operations in May 2014. The Company is in the process of shipping the remaining inventory at the Baltimore facility to other Worthington locations and expects to completely exit the facility before the end of the first quarter of fiscal 2015. In connection with this matter, the Company recognized an accrual of $1,380,000 for expected severance costs.

•

During May 2014, the Company completed the closure of its Mid-Rise construction business. In connection with this matter, the Company recognized an accrual of $564,000 for expected severance costs.

A progression of the liabilities associated with our restructuring activities, combined with a reconciliation to the restructuring and other expense financial statement caption in our consolidated statement of earnings for fiscal 2013, is summarized as follows:


(in thousands)	Beginning Balance		Expense			Payments			Adjustments		Ending Balance
Early retirement and severance	$	4,892	$	2,228		$	(2,388	)	$	297	$	5,029
Facility exit and other costs		691		2,347			(2,378	)		540		1,200

	$	5,583		4,575		$	(4,766	)	$	837	$	6,229

Net gain on sale of assets				(1,886	)
Less: joint venture transactions				604

Restructuring and other expense			$	3,293

During fiscal 2013, the following actions were taken in connection with the Transformation Plan:

•

In connection with the wind-down of our former Metal Framing operating segment:

•

Approximately $1,546,000 of facility exit and other costs were incurred in connection with the closure of certain facilities that were retained.

•

The severance accrual was adjusted downward, resulting in a $264,000 credit to earnings.

•

Certain assets classified as held for sale were disposed of for cash proceeds of $5,637,000 resulting in a net gain of $1,886,000.

These items were recognized within the “joint venture transactions” financial statement caption in our consolidated statement of earnings to correspond with amounts previously recognized in connection with the formation of ClarkDietrich and the subsequent wind-down of our former Metal Framing operating segment.

•

In connection with the closure of our commercial stairs business, we incurred net charges of approximately $1,530,000, consisting of $1,624,000 of facility exit and other costs and a $94,000 credit to severance expense.

•

In connection with certain organizational changes impacting our former Global Group operating segment, we accrued approximately $98,000 of employee severance.

•

In connection with the sale of our Pressure Cylinders operations in Czech Republic, we recognized approximately $177,000 of facility exit and other costs.

•

In connection with the previously-announced consolidation of the BernzOmatic hand torch manufacturing operation in Medina, New York into the existing Pressure Cylinders’ facility in Chilton, Wisconsin, we recognized a $2,488,000 accrual for expected employee severance costs.