Special Charges

12 Months Ended

Sep. 30, 2019

In connection with various organizational changes to improve our business alignment and cost structure, we recognized Special charges of $28.4 million, $77.6 million and $37.4 million in fiscal 2019, 2018 and 2017. Although these charges are infrequent and unusual in nature, additional Special charges are expected to be incurred. It is not practicable to estimate the amount of these future expected costs until such time as the evaluations are complete.

These charges are summarized as follows:

Legal Claim Recovery and Legal Settlement

In fiscal 2018, we received a settlement payment for a legal claim and recorded a gain of $1.2 million in Special charges.

In fiscal 2017, we entered into a confidential agreement with Stryker Corporation, resolving alleged infringement of certain Hillrom patents covering proprietary communications networks resulting in a gain of $15.1 million recorded in Special charges.

Dispositions

In fiscal 2018, we recorded a loss of $24.5 million in Special charges related to the UHS Settlement Agreement (Note 3).

In fiscal 2017, we sold our Völker business. We recorded impairment charges of $25.4 million in fiscal 2017, relating mainly to non-cash write-downs of long-lived assets and working capital associated with the Völker brand portfolio and fiscal 2017 related transaction costs of approximately $3.0 million in Special charges (Note 3).

In fiscal 2017, we sold our Architectural Products business and recorded $1.1 million of expense, primarily related to severance, in Special charges (Note 3).

Business Optimization and Realignment

Management pursues opportunities to align our operations to achieve synergies and position the business for growth. In fiscal 2018, a global transformation program was launched that was focused on reducing complexity, increasing efficiency, improving our cost structure with targeted investments that align with our strategic priorities,

As part of this program, management launched an initiative related to a global information technology transformation, including rationalizing and transforming our enterprise resource planning software solutions and other complementary information technology systems. In fiscal 2019, the Company incurred $3.3 million related to this initiative, of which $2.0 million was capitalized and $1.3 million was expensed in Special charges. The objective of this initiative is to consolidate and streamline our key workstreams that interact with customers and vendors, support our financial reporting processes and maintain the security of our data. The solutions designed under this initiative will be implemented over the next five to seven years.

We acquired Breathe and Voalte in fiscal 2019 and Mortara in fiscal 2017 and initiated integration activities to achieve the available synergies of our combined company. We also incurred costs, including severance and benefit costs, associated with other business realignment and integration activities.

In fiscal 2019, we incurred total business optimization and realignment charges of approximately $21.1 million, of which $12.9 million were severance and benefit costs with the remainder related to professional fees and project management costs. These amounts compare to charges of $38.4 million and $7.6 million in fiscal 2018 and 2017, of which $17.6 million and $3.5 million were severance and benefit costs.

The restructuring in Europe to reduce our European manufacturing capacity and to streamline our operations is complete and, in fiscal 2017, we recorded Special charges of $0.9 million for legal and professional fees, temporary labor, project management, severance and benefit costs, and other administrative functions. We do not expect to incur further costs related to this action.

Site Consolidation

We continue to streamline our operations and simplify our supply chain by consolidating certain manufacturing and distribution operations (“Site Consolidation”). In fiscal 2019, we recorded total charges of $7.3 million, related to these efforts, of which $1.8 million were severance and benefit costs. The remaining costs primarily consisted of lease termination and facility closure costs related to one site. In fiscal 2018, we recorded total charges related to these activities of $15.9 million, of which $3.7 million were severance and benefit costs. In fiscal 2017, we recorded total charges of $19.7 million, of which $5.1 million were severance and benefit costs.

In fiscal 2017, we sold our Charleston property for $6.1 million in cash proceeds and recorded a gain of $5.2 million in Special charges.

For all accrued severance and other benefit charges described above, we record restructuring reserves within Other current liabilities. The reserve activity for severance and other benefits in fiscal 2019 and 2018 was as follows:



Balance as of September 30, 2017	$	9.0
Expenses	21.3
Cash Payments	(20.9		)
Reversals	(0.9		)
Balance as of September 30, 2018	8.5
Expenses	16.4
Cash Payments	(15.1		)
Reversals	(1.3		)
Balance as of September 30, 2019	$	8.5