v3.22.2
Strategic Transformation and Restructuring, Impairment and Other Asset Charges
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6 Months Ended |
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Restructuring, Settlement and Impairment Provisions [Abstract] |
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Strategic Transformation and Restructuring, Impairment and Other Asset Charges |
Strategic Transformation and Restructuring, Impairment and Other Asset ChargesThe Company's Simplify, Focus and Grow Strategic Transformation ("SFG") initiative, which began in 2019, generally includes facility rationalization, asset impairment, workforce reduction, the associated costs of organizational integration activities and strategic transformational initiatives. As part of the SFG initiative several strategic decisions have been made to divest of underperforming manufacturing sites or product lines, including to close certain subsidiaries, close and sell manufacturing sites and relocate the product lines manufactured at each of these sites to other Company locations; exit the oil, gas and water well product lines; and sell certain assets, which are included in "Restructuring, impairment and other asset charges, net" on the Company's Consolidated Statements of Operations.
The Company also has a multi-year phased implementation of a standardized enterprise resource planning ("ERP") system across the global organization underway, which will replace much of the existing disparate core financial systems. The upgraded ERP will initially convert internal operations, manufacturing, finance, human capital resources management and customer relationship systems to cloud-based platforms. This new ERP system will provide for standardized processes and integrated technology solutions that enable us to better leverage automation and process efficiency. An implementation of this scale is a major financial undertaking and will require substantial time and attention of management and key employees. In addition, beginning in the first quarter of 2022, a lean manufacturing initiative at one of the Company's largest sites was initiated and is expected to drive improvement in gross margin at that site. This improvement is intended to serve as the optimal blueprint for the Company's other manufacturing facilities.
Costs incurred of $6.4 million and $11.7 million related to these strategic transformational initiatives in the three and six months ended June 30, 2022, respectively, are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations. Costs totaling $2.1 million and $5.3 million were incurred in the three and six months ended June 30, 2021, respectively.
In addition, the Company periodically sells or disposes of its assets in the normal course of its business operations as they are no longer needed or used and may incur gains or losses on these disposals. Certain of the costs associated with these decisions are separately identified as restructuring. The Company reports asset impairment charges and gains or losses on the sales of property and equipment collectively, with restructuring charges in "Restructuring, impairment and other asset charges, net" in the Consolidated Statements of Operations to the extent they are experienced.
Restructuring, asset impairment charges and the net gain on sale of property and equipment are presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in millions) | 2022 | | 2021 | | 2022 | | 2021 | Restructuring charges: | | | | | | | | Costs associated with closing Tacoma | $ | — | | | $ | 0.6 | | | $ | 0.8 | | | $ | 1.0 | | Costs associated with closing Enid | 0.4 | | | — | | | 0.6 | | | — | | Costs associated with closing Mequon | — | | | 0.2 | | | — | | | 0.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total restructuring related charges | 0.4 | | | 0.8 | | | 1.4 | | | 1.6 | | | | | | | | | | Asset impairment charges: | | | | | | | | | | | | | | | | | | | | | | | | Other impairment charges | 3.0 | | | 0.2 | | | 3.0 | | | 0.2 | | Total asset impairment charges | 3.0 | | | 0.2 | | | 3.0 | | | 0.2 | | | | | | | | | | Gain on sale of property and equipment, net: | | | | | | | | Gain on sale of property and equipment, net | — | | | (0.2) | | | — | | | (0.3) | | Total gain on sale of property and equipment, net | — | | | (0.2) | | | — | | | (0.3) | | | | | | | | | | Restructuring, impairment and other asset charges, net | $ | 3.4 | | | $ | 0.8 | | | $ | 4.4 | | | $ | 1.5 | |
Restructuring charges by segment are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in millions) | 2022 | | 2021 | | 2022 | | 2021 | Infrastructure Solutions | $ | 0.4 | | | $ | 0.6 | | | $ | 1.4 | | | $ | 1.0 | | Materials Solutions | — | | | 0.2 | | | — | | | 0.6 | | | | | | | | | | Total restructuring related charges | $ | 0.4 | | | $ | 0.8 | | | $ | 1.4 | | | $ | 1.6 | |
Impairment charges by segment are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in millions) | 2022 | | 2021 | | 2022 | | 2021 | Infrastructure Solutions | $ | 2.1 | | | $ | — | | | $ | 2.1 | | | $ | — | | Corporate | 0.9 | | | — | | | 0.9 | | | — | | Materials Solutions | — | | | 0.2 | | | — | | | 0.2 | | Total impairment charges | $ | 3.0 | | | $ | 0.2 | | | $ | 3.0 | | | $ | 0.2 | |
The net gain on sale of property and equipment by segment are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in millions) | 2022 | | 2021 | | 2022 | | 2021 | Infrastructure Solutions | $ | — | | | $ | (0.1) | | | $ | — | | | $ | (0.2) | | Materials Solutions | — | | | (0.1) | | | — | | | (0.1) | | | | | | | | | | Total gain on sale of property and equipment, net | $ | — | | | $ | (0.2) | | | $ | — | | | $ | (0.3) | |
In January 2021, the Company announced plans to close the Tacoma facility in order to simplify and consolidate operations. The Tacoma facility ceased manufacturing operations at the end of 2021. The transfer of the manufacturing and marketing of Tacoma product lines to other facilities within the Infrastructure Solutions segment was completed during the first quarter of 2022. In conjunction with this action, the Company recorded $0.6 million and $1.0 million of restructuring related charges during the three and six months ended June 30, 2021, respectively, in "Restructuring, impairment and other asset charges, net" in the Consolidated Statements of Operations. Additional restructuring costs of $0.8 million were incurred during the three months ended March 31, 2022. The Company recorded the Tacoma facility's land, building and certain equipment assets of $15.4 million, which are currently being marketed for sale, as held for sale in its Consolidated Balance Sheets at June 30, 2022.
In late 2019, the oil and gas drilling product lines produced at the Enid, Oklahoma location ("Enid") were impaired and discontinued. Additional restructuring costs of $0.4 million and $0.6 million were incurred during the three and six months ended June 30, 2022, respectively. Enid's land and building assets totaling $5.1 million are included in "Assets held for sale" in the Consolidated Balance Sheets at June 30, 2022 and December 31, 2021.
In October 2020, the Company closed a transaction for the sale of Enid's water well assets, which included equipment, inventories and intangible assets. The purchase price for this transaction was approximately $6.9 million, net of purchase price adjustments completed in January 2021 whereby the Company had an obligation to pay the buyer $1.1 million. This obligation was settled in the first quarter of 2021.
In June 2020, the Company announced the closing of the Mequon site in order to simplify and consolidate operations. The Mequon facility ceased production operations in August 2020. Charges totaling $0.2 million and $0.6 million were incurred during the three and six months ended June 30, 2021, respectively.
During the three months ended June 30, 2022, the Company determined that certain manufacturing equipment contracted to be constructed by a third-party vendor, which had been prepaid, would not be recovered. Impairment charges of $2.1 million were recorded in "Restructuring, impairment and other asset charges, net" in the Consolidated Statements of Operations during the three months ended June 30, 2022. An additional $0.9 million of impairment charges were incurred related to abandoned in-process internally developed software that was determined to be impaired during the quarter.
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- DefinitionThe entire disclosure of costs incurred for restructuring including, but not limited to, exit and disposal activities, remediation, implementation, integration, asset impairment, and charges against earnings from the write-down of assets.
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