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Restructuring
6 Months Ended
Nov. 30, 2018
Restructuring And Related Activities [Abstract]  
Restructuring

NOTE 3 — RESTRUCTURING

 

We record restructuring charges associated with management-approved restructuring plans to either reorganize one or more of our business segments, or to remove duplicative headcount and infrastructure associated with our businesses. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations, contract cancellation costs and other costs. Restructuring charges are recorded based upon planned employee termination dates and site closure and consolidation plans. The timing of associated cash payments is dependent upon the type of restructuring charge and can extend over a multi-year period. We record the short-term portion of our restructuring liability in Other Accrued Liabilities and the long-term portion, if any, in Other Long-Term Liabilities in our Consolidated Balance Sheets.

 

2020 MAP to Growth

 

Between May and August 2018, we approved and implemented the initial phases of a multi-year restructuring plan, the 2020 Margin Acceleration Plan (“2020 MAP to Growth”).  The initial phases of our plan affected on all of our reportable segments as well as our corporate/nonoperating segment and focused on margin improvement by simplifying business processes; reducing inventory categories and rationalizing SKUs; eliminating underperforming businesses; reducing headcount and working capital; and improving operating efficiency.  The majority of the activities included in the initial phases of the restructuring activities have been completed.

 

During the second quarter ended November 30, 2018, we formally announced the final phases of our 2020 MAP to Growth.  This multi-year restructuring is expected to increase operational efficiency while maintaining our entrepreneurial growth culture and will include three additional phases between September 2018 and December 2020.  Our execution of the restructuring plan will continue to drive the de-layering and simplification of management and businesses associated with group realignment.  We will implement four center-led functional areas including manufacturing and operations; procurement and supply chain; information technology; and accounting and finance.

 

Our restructuring plan will optimize our manufacturing facilities and will ultimately provide more efficient plant and distribution facilities.  In the first phase of the restructuring we are implementing the planned closure of twelve plants and seven warehouses.  We also expect to incur additional severance and benefit costs as part of our planned closure of these facilities.

 

Throughout the additional phases of our MAP to Growth initiative, we will continue to assess and find areas of improvement and cost savings.  As such, the final implementation of the aforementioned phases and total expected costs are subject to change.  In addition to the announced plan, we have continued to broaden the scope of our MAP to Growth initiative, specifically in consolidation of the general and administrative areas, potential outsourcing, as well as additional future plant closures and consolidations; the estimated costs of which have not yet been finalized.  The current total expected costs associated with this plan are outlined in the table below and decreased by approximately $5.7 million compared to our previous estimate, primarily attributable to a reduction in expected facility closure and other related costs within our industrial segment as well as a reduction in the expected severance charges within our consumer segment.  All activities under our 2020 MAP to Growth are anticipated to be completed by the end of calendar year 2020.

A summary of the charges recorded in connection with restructuring by reportable segment during fiscal 2019 is as follows:

 

 

 

Three Months Ended

 

Six Months Ended

 

Cumulative Costs

 

Total Expected

 

(in thousands)

 

November 30, 2018

 

November 30, 2018

 

to Date

 

Costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance and benefit costs (a)

 

$

279

 

$

1,830

 

$

7,482

 

$

8,710

 

Facility closure and other related costs

 

 

170

 

 

170

 

 

5,309

 

 

12,445

 

Other asset write-offs

 

 

2

 

 

2

 

 

2

 

 

2

 

Total Charges

 

$

451

 

$

2,002

 

$

12,793

 

$

21,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance and benefit costs (b)

 

$

3,407

 

$

9,772

 

$

11,944

 

$

12,396

 

Facility closure and other related costs

 

 

867

 

 

1,303

 

 

2,347

 

 

21,800

 

Other asset write-offs

 

 

149

 

 

727

 

 

2,097

 

 

2,097

 

Total Charges

 

$

4,423

 

$

11,802

 

$

16,388

 

$

36,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance and benefit costs (c)

 

$

1,786

 

$

3,933

 

$

3,933

 

$

5,367

 

Facility closure and other related costs

 

 

-

 

 

-

 

 

-

 

 

3,776

 

Other asset write-offs

 

 

3

 

 

3

 

 

3

 

 

3

 

Total Charges

 

$

1,789

 

$

3,936

 

$

3,936

 

$

9,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate/Other Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance and benefit costs (d)

 

$

1,061

 

$

10,060

 

$

12,196

 

$

12,657

 

Total Charges

 

$

1,061

 

$

10,060

 

$

12,196

 

$

12,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance and benefit costs

 

$

6,533

 

$

25,595

 

$

35,555

 

$

39,130

 

Facility closure and other related costs

 

 

1,037

 

 

1,473

 

 

7,656

 

 

38,021

 

Other asset write-offs

 

 

154

 

 

732

 

 

2,102

 

 

2,102

 

Total Charges

 

$

7,724

 

$

27,800

 

$

45,313

 

$

79,253

 

 

(a)

Current quarter charges include $0.3 million associated with elimination of 35 positions.  Current year charges include $1.8 million associated with the elimination of 44 positions.  

(b)

Current quarter charges include $3.4 million associated with the elimination of 54 positions.  Current year charges include $9.6 million associated with the elimination of 148 positions and $0.2 million additional charges associated with the prior elimination of one position within the legal function during fiscal 2018.

(c)

Current quarter charges include $1.8 million associated with the elimination of 60 positions.  Current year charges include $3.9 million associated with the elimination of 107 positions.

(d)

Reflects charges related to the severance of two corporate executives, as well as accelerated vesting of equity awards for two corporate executives, four specialty segment executives and three industrial segment executives in connection with the aforementioned restructuring activities.

A summary of the activity in the restructuring reserves related to our 2020 MAP to Growth is as follows:

 

(in thousands)

Severance and Benefits Costs

 

Facility Closure and Other Related Costs

 

Other Asset Write-Offs

 

Total

 

Balance at August 31, 2018

$

10,960

 

$

5,364

 

$

-

 

$

16,324

 

Additions charged to expense

 

6,533

 

 

1,037

 

 

154

 

 

7,724

 

Cash payments charged against reserve

 

(6,013

)

 

(1,330

)

 

-

 

 

(7,343

)

Non-cash charges included above (e)

 

(1,053

)

 

(2,536

)

 

(154

)

 

(3,743

)

Balance at November 30, 2018

$

10,427

 

$

2,535

 

$

-

 

$

12,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Severance and Benefits Costs

 

Facility Closure and Other Related Costs

 

Other Asset Write-Offs

 

Total

 

Balance at June 1, 2018

$

9,957

 

$

6,184

 

$

1,373

 

$

17,514

 

Additions charged to expense

 

25,595

 

 

1,473

 

 

732

 

 

27,800

 

Cash payments charged against reserve

 

(18,588

)

 

(1,748

)

 

 

 

 

(20,336

)

Non-cash charges included above (e)

 

(6,537

)

 

(3,374

)

 

(2,105

)

 

(12,016

)

Balance at November 30, 2018

$

10,427

 

$

2,535

 

$

-

 

$

12,962

 

 

(e)

Non-cash charges primarily include accelerated vesting of equity awards and asset-write offs.

 

In connection with our 2020 MAP to Growth, during the second quarter of fiscal 2019, we incurred approximately $2.6 million and $1.0 million of inventory-related charges at our industrial and consumer segments, respectively.  During the first half of fiscal 2019, we incurred approximately $7.1 million and $1.3 million of inventory-related charges at our industrial and consumer segments, respectively.  The inventory-related charges are partially offset by a favorable adjustment of approximately $0.2 million to the previous write-off at our consumer segment.  All of the aforementioned inventory-related charges are recorded in cost of sales in our Consolidated Statements of Income.  These inventory charges were the result of product line and SKU rationalization initiatives in connection with our overall plan of restructuring.