Cost Reduction Plan

On January 30, 2014, the Company announced a cost reduction plan (the “Restructuring Plan - Phase I”) which resulted in the reduction of the Company’s overall headcount by approximately 260 employees. In connection with the Restructuring Plan - Phase I, the Company recorded a liability of $10.0 million in the first quarter of fiscal 2014, consisting of costs for severance, employee-related benefits and other associated expenses.

The costs of the Restructuring Plan - Phase I of $6.3 million related to ongoing business volume were a component of the Company’s fiscal 2014 U.S. government forward pricing rates, and therefore, were recovered through the pricing of the Company’s products and services to the U.S. government.

The costs of the Restructuring Plan - Phase I of $3.0 million related to the integration of the Rocketdyne Business, as of November 30, 2014, have been capitalized and recorded in other noncurrent assets in the unaudited condensed consolidated balance sheet. See Note 4(f) for a discussion of the capitalization of such costs.

As part of the Company's on-going efforts to optimize business resources, during the fourth quarter of fiscal 2014, the Company determined a cost reduction plan (the “Restructuring Plan - Phase II”) was necessary which resulted in the accrual for the reduction of the Company's overall headcount by approximately 90 employees and the closing of a facility. In connection with the Restructuring Plan - Phase II, the Company recorded a liability of $4.3 million in the fourth quarter of fiscal 2014, consisting of costs for severance, employee-related benefits and other associated expenses. Additionally, in the first quarter of fiscal 2015, the Company determined that the overall headcount should be reduced by approximately an additional 60 employees which resulted in the Company recording a liability of $4.1 million. In the second quarter of fiscal 2015, the Company recorded a reduction to the liability of $5.1 million for payments made under the cost reduction plan and changes to the expected headcount reduction. These costs are a component of the Company’s fiscal 2015 U.S. government forward pricing rates, and therefore, will be recovered through the pricing of the Company’s products and services to the U.S. government.

During the second quarter of fiscal 2015, the Company initiated a competitive improvement program (the “CIP”) comprised of activities and initiatives aimed at reducing costs in order for the Company to continue to compete successfully. The CIP is composed of three major components: (i) facilities optimization and footprint reduction; (ii) product affordability; and (iii) reduced administrative and overhead costs. Under the CIP, the Company expects an estimated 500 headcount reduction in its total employee population. The Company currently estimates that it will incur restructuring and related costs over the next four years totaling approximately $110 million. A summary of the Company's CIP reserve activity for the second quarter of fiscal 2015 is shown below:



	Severance		Retention		Total
	(In millions)
February 28, 2015	$	—	$	—	$	—
Accrual established	10.7		0.5		11.2
May 31, 2015	$	10.7	$	0.5	$	11.2

The costs associated with the CIP will be a component of the Company’s U.S. government forward pricing rates, and therefore, will be recovered through the pricing of the Company’s products and services to the U.S. government. In addition to the employee-related CIP obligations, the Company incurred non-cash accelerated depreciation expense of $0.1 million in the second quarter of fiscal 2015 associated with changes in the estimated useful life of long-lived assets impacted by the CIP.